Preamble

The House met at a quarter before Three of the Clock, Mr. SPEAKER in the Chair.

NEW WRIT.

For the Borough of Poplar (Bow and Bromley Division), in the room of the Right Honourable George Lansbury, deceased.—(Sir Charles Edwards.)

PRIVATE BUSINESS.

CARDIFF CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.

HUDDERSFIELD CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.

Read a Second time, and committed.

MINISTRY OF HEALTH PROVISIONAL ORDER (HUDDERSFIELD) BILL.

Order for Second Reading read, and discharged: Bill withdrawn.

MINISTRY OF HEALTH PROVISIONAL ORDER (NORWICH) BILL.

NEWCASTLE-UPON-TYNE CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL.

Read a Second time, and committed.

Oral Answers to Questions — EGYPT (GERMANS AND ITALIANS).

Colonel Wedgwood: asked the Under-Secretary of State for Foreign Affairs whether he has any information as to what precautions are being taken in connection with Italians and Germans in Egypt in view of what has happened in Norway and Holland?

The Under-Secretary of State for Foreign Affairs (Mr. Butler): The right hon. Gentleman can rest assured that the Egyptian Government, acting in close consultation and co-operation with the British authorities, are taking all appropriate measures for the maintenance of internal security in Egypt in the event of emergency.

Oral Answers to Questions — REFUGEES.

Mr. Beechman: asked the Under-Secretary of State for Foreign Affairs whether, in view of the increasing number of refugees entering this country, he will appeal to the United States of America to take as many refugees as possible; and, in particular, whether he will request the American authorities to speed up their reception of refugees who are in this country on their way to the United States of America, and whose entry into the United States of America has already been sanctioned by that country?

Mr. Butler: This matter is receiving by Noble Friend's attention.

Mr. Sorensen: asked the Secretary of State for the Home Department whether he will indicate the percentage of refugees from Nazi oppression who are known to have committed hostile acts in this country; how this compares with similar acts committed by nationals of friendly States who were resident in this country; and whether friendly German and Austrian refugees recently interned are kept separate from known Nazi Government supporters?

The Under-Secretary of State for the Home Department (Mr. Peake): I regret that no statistics are available to enable a comparison to be drawn such as the hon. Member suggests. The responsibility for the custody of German and Austrian male internees rests with the War Office and a Question on this subject is being addressed tomorrow to my right hon. Friend the Secretary of State for War. As regards women internees, arrangements have been made for their accommodation in the Isle of Man.

Mr. Sorensen: May we take it that far fewer hostile acts have been committed by these refugees from Nazi oppression than have been committed by the I.R.A.?

Mr. Peake: We have not any accurate definition of what is a hostile act, but speaking from memory, I cannot recall any case since the beginning of the war of anything which could be described as a hostile act having been proved in a court of law to be attributable to either of the classes of aliens mentioned in the hon. Gentleman's Question.

Mr. Sorensen: Will the hon. Gentleman make that as publicly known as possible to counteract extravagant anti-refugee agitation?

Mr. Woodburn: May I take it that the Government wish to cause no undue hardship by this Regulation, and in cases of such hardship, will they permit other members of the family, such as elderly or aged mothers, to go with their relatives to the Isle of Man, if they wish to do so?

Mr. Peake: All those questions are at present under consideration?

Colonel Wedgwood: Will the Minister take an early opportunity of going round the camps himself to inquire into conditions and see how far they can be ameliorated?

Mr. Peake: I have been once to one of these camps, and I hope to go again before long.

Mr. G. Strauss: In cases where married couples are interned, are they interned together, or sent to separate internment camps?

Mr. Peake: At the moment they are sent to separate internment camps, but, as I have indicated, the question of mixed internment camps is under consideration.

Mr. Logan: In regard to a Question that was asked yesterday by the hon. Member for Bridgeton (Mr. Maxton), would it not be advisable to adopt German families?

Oral Answers to Questions — RUSSIA (SIR S. CRIPPS' MISSION).

Colonel Wedgwood: asked the Under-Secretary of State for Foreign Affairs whether the hon. and learned Member for Bristol (Sir S. Cripps) has been appointed as Ambassador, or in lieu of such, to Russia; whether he will draw salary and allowances over and above his pay as Member of Parliament; and, if so, how much and for what period?

Mr. Butler: I hope that it will be possible to make a statement shortly.

Colonel Wedgwood: In view of present associations with the Soviet Government may I ask the right hon. Gentleman whether it is not possible to stop anti-Soviet broadcasts and news at the present time?

Mr. Butler: The matter will receive my Noble Friend's attention.

Oral Answers to Questions — SPAIN (SIR S. HOARE'S MISSION).

Colonel Wedgwood: asked the Under-Secretary of State for Foreign Affairs whether the right hon. Member for

Chelsea (Sir S. Hoare) has been appointed as an Ambassador, or in lieu of such, to Spain; whether he will draw salary and allowances over and above his pay as Member of Parliament; and, if so, how much and for what period?

Mr. Butler: Sir Samuel Hoare has been appointed as Ambassador Extraordinary and Plenipotentiary on Special Mission. He will draw no salary in addition to his pay as Member of Parliament, but will receive frais de représentation at a rate appropriate to his mission.

Mr. R. C. Morrison: Has the right hon. Gentleman seen a statement in the Press this morning that the right hon. Member for Chelsea (Sir S. Hoare) left London this morning by special train for an aerodrome? Was it necessary to have a special train for the right hon. Gentleman?

Mr. Butler: I understand that the right hon. Gentleman went from an aerodrome, which he could have reached without a special train. I am not aware of the special train.

Oral Answers to Questions — ALLIES' WAR AIMS (POLAND).

Mr. Mander: asked the Under-Secretary of State for Foreign Affairs whether it is proposed to associate with the joint Anglo-French secretariat established in connection with various aspects of the Allied war efforts, any representative of the Polish Government?

Mr. Butler: The question of closer association between representatives of the Polish Government and the various Anglo-French organisations is at present under discussion with the Polish Government.

Oral Answers to Questions — ROTTERDAM (DUTCH AND NEUTRAL SHIPPING).

Captain Plugge: asked the First Lord of the Admiralty whether, before the fall of Rotterdam, the numerous neutral and Dutch ships were evacuated in time so as not to fall into the hands of the enemy?

The Parliamentary Secretary to the Admiralty (Sir Victor Warrender): The Admiralty have no direct control over Dutch or neutral vessels, but the numerous vessels which took our advice were sailed and afforded every facility for reaching an Allied port.

Oral Answers to Questions — NAVAL RESERVISTS (TOBACCO PRICES).

Mr. R. J. Taylor: asked the First Lord of the Admiralty whether naval reservists, on being recalled to the Service and now serving on one of His Majesty's ships (Depot), are given the same privileges as to duty-free cigarettes and tobacco as are applicable to sea-going ratings?

Sir V. Warrender: Naval reservists who have been called up enjoy exactly the same customs privileges as all other ratings. These privileges depend on the status of the ship or establishment, and are only granted in full to sea-going ships. Men in shore establishments and non-seagoing depot ships which fulfil certain conditions can obtain Service tobacco free of duty.

Oral Answers to Questions — COLONIAL SUGAR (PRICE).

Mr. Jagger: asked the Under-Secretary of State for the Colonies whether, assuming the present basic allotment of special preference is continued, there will be any reason for a varying price for sugar to be paid to the different Colonies?

The Under-Secretary of State for the Colonies (Mr. George Hall): No, Sir. The intention is to continue to pay the same basic price to all Colonies.

Oral Answers to Questions — TRINIDAD (URIAH BUTLER DETENTION).

Mr. Creech Jones: asked the Under-Secretary of State for the Colonies what are the conditions of detention of Uriah Butler in Trinidad; whether this detention is indefinite; and whether any charge has been brought against him or any opportunity given him for appeal?

Mr. George Halls: In November, 1939, Uriah Butler was detained by Order under the Colonial Defence Regulations. The detention continues as long as the Order remains in force. Butler had the opportunity to appeal but did not exercise it. The Governor indicated some time ago that he contemplated reviewing the case and, if further information is not received shortly, inquiry will be made of him by telegram as to the result of his review. I will then communicate with my hon. Friend.

Oral Answers to Questions — JAMAICA (GOVERNOR'S POWERS).

Mr. Creech Jones: asked the Under-Secretary of State for the Colonies, what protests he has received from Jamaica complaining about the use by the Governor of his powers in respect to paramount importance; whether he is satisfied that such powers were used in conformity with the constitution; and what steps he is taking to extend democratic government in the Colony?

Mr. George Hall: Representations have been received from a public meeting in Kingston. There has also been received direct a copy of a protest which is said to have been sent by certain elected members of the Legislative Council through the Governor, but this, with the Governor's comments, has not yet reached my Noble Friend. On its receipt the matter will be examined. As regards the last part of the Question, I would refer to the reply given to my hon. Friend on 6th March.

Mr. Riley: Are there any precedents for the use of these powers of "paramount importance," indicated in the Question?

Mr. Hall: I must have notice of that question.

Oral Answers to Questions — WEST AFRICA (COCOA CROP).

Mr. Sorensen: asked the Under-Secretary of State for the Colonies whether he can make a statement regarding the disposal of the surplus of the present season's West African cocoa crop?

Mr. George Hall: As the answer is rather long I will, with my hon. Friend's permission, circulate it in the OFFICIAL REPORT.

Following is the answer:

The accumulation of stocks of cocoa in West Africa consequent upon the loss of normal pre-war markets, particularly in Germany, Holland and Scandinavia, has already created serious pressure on available storage space. The purchasing of the mid-crop is to begin next week and His Majesty's Government have had to reach a decision as to the best method of its disposal. Possible outlets in this country are limited both by the natural limitations of demand and by the difficulties of rendering available additional shipping for cocoa, except at the expense of more essential commodities. Every


effort has been, and will continue to be, made to effect sales in the markets which still remain open, but it is unfortunately impossible to hope for any large immediate increase in those sales. The possibility of local utilisation, for example by conversion into cocoa butter, is unfortunately ruled out by the absence of plant and the impossibility of obtaining it at the present moment.

In these circumstances His Majesty's Government have decided, after full consultation with the Governments of the Gold Coast and Nigeria that the most economical procedure will be to destroy the mid-crop as it is purchased and those Governments have been authorised to proceed accordingly. The mid-crop cocoa is inferior in quality to the main crop and even if it could be stored locally any attempt to dispose of it concurrently with the new main crop which will be available later in the year would be merely postponing difficulties. It is also intended to destroy, as circumstances require, such other cocoa already in store, as is found on inspection to have become unfit for marketing. Losses of this kind always occur, though not on the scale expected this year, since normally little cocoa remains in West Africa so late in the year as this. If cocoa of inferior quality is not destroyed at this season it quickly breeds insect pests and becomes a menace to the new crop.

The total quantity which will eventually be destroyed cannot be stated at present. It will naturally depend upon the progress of sales in over sea markets during the remainder of the season. The position will be reviewed each month to ensure that the proper balance is maintained between destruction and sales.

Oral Answers to Questions — ELECTRICITY COMMISSIONERS (GRANTS).

Mr. Hely-Hutchinson: asked the Minister of Transport whether he is aware that the Electricity Commissioners have not yet settled and distributed to authorised undertakers the form of application for grants under Section 38 of the Civil Defence Act, 1939; and can he give an early date when such forms will be ready for circulation?

The Minister of Transport (Sir John Reith): Yes, Sir, before the end of the present week.

Oral Answers to Questions — MINISTRY OF INFORMATION.

YUGOSLAVIA (SIR NEVILE HENDERSON'S BOOK).

17. Mr. Mander: asked the Minister of Information why Sir Nevile Henderson's recent book was serialised in the Yugoslav Press through the instrumentality of the British Press Attaché at Belgrade; and whether he is aware that some of the passages selected have been greatly resented and were looked upon for a time as German propaganda?

The Minister of Information (Mr. Duff Cooper): The book was serialised in one Jugoslav newspaper not through the instrumentality of the British Press Attaché, but through a British news agency. The selection of the extracts published was made by the newspaper. Reports from Belgrade do not confirm that certain passages were greatly resented. But in any event a book must be considered as a whole and I am satisfied that Sir Nevile Henderson's book, far from being looked on as German propaganda, demonstrates the responsibility of Germany for the outbreak of war.

Mr. Lyons: Will the right hon. Gentleman consider putting this book into circulation in working men's institutes and public libraries in large quantities?

Mr. Cooper: Yes, Sir.

BATTLE OF NARVIK (BROADCAST).

Commander Sir Archibald Southby: asked the Minister of Information whether his attention has been called to the protests which have been made at the methods employed by the British Broadcasting Corporation in giving their account of the Battle of Narvik in a broadcast on Whit Monday when impersonations of both living and dead persons were given over the air; whether he is aware that such impersonations of those who have been killed cause great pain to their relatives; and whether he will take steps to prevent the recurrence of similar action in the future?

Mr. Cooper: The answer to the first part of the Question is in the affirmative. The British Broadcasting Corporation deeply regret any pain should have been caused by this production, the only object of which was to attempt to give a dramatic account of an heroic event. In future the greatest care will be taken


to avoid anything that could possibly distress the relatives of the fallen.

Sir A. Southby: Will the right hon. Gentleman see that on no future occasion will broadcasts of this unpardonably bad taste be allowed?

Mr. Cooper: Yes, Sir.

PROPAGANDA BY FRIENDLY ALIENS.

Mr. Sorensen: asked the Minister of Information whether he is fully utilising the service of Czech and Austrian refugees of proven friendship with this country in propaganda to their respective countries; and whether he has taken any special steps to see that the recent pronouncement of the Vatican respecting aggressive war is conveyed to the Roman Catholic peoples of enemy and neutral States?

Mr. Cooper: Yes, Sir. As regards the second part of the Question, all practical steps have been taken to convey the pronouncement of the Vatican on aggressive war both to enemy and neutral States.

FOREIGN LANGUAGE BROADCASTS (FADING).

Major Milner: asked the Minister of Information whether he is aware of the complaints regarding the fading of British Broadcasting Corporation broadcasts in French; whether any tests have been made of the reception of our broadcasts in foreign languages, if so, with what result, and, if not, will such test be arranged?

Mr. Cooper: Broadcasts made on medium waves are, generally speaking, only effective at the longer ranges after nightfall, so that in the summer the period when they can be received by listeners in the more distant parts of the Continent is necessarily limited. Tests made by the B.B.C. and reports from many listeners indicate, however, that reception on medium waves in the nearer part of the Continent, including the northern part of France, is satisfactory. The B.B.C. broadcasts in French are sent on both short and medium waves, and, according to the many reports available, the short wave transmissions are well received in France both by day and by night.

Major Milner: If I can give my right hon. Friend some evidence of fading in Central France through lack of power, will he look into it?

Mr. Cooper: Certainly.

Oral Answers to Questions — POST OFFICE.

POSTAGE RATES (BRITAIN AND FRANCE).

Mr. Grahsam White: asked the Postmaster-General whether he will consider the advisability of making the postage rates between Britain and France the same as for inland correspondence?

The Postmaster-General (Mr. W. S. Morrison): I will consider the possibility of a reduction in the postage rates between the two countries in consultation with the French Administration.

EVACUATED CHILDREN (CORRESPONDENCE).

Lieut.-Colonel Sir Thomas Moore: asked the Postmaster-General whether he will consider giving the same concession to evacuee children desiring to write to their parents as is already granted to correspondence with the British Expeditionary Force?

Mr. W. S. Morrison: I regret that the difficulties involved would make it impracticable to operate such a concession. There is the further consideration that a concession in this case would evoke claims for similar treatment from other classes of the community who feel that they are equally entitled to special consideration.

Sir T. Moore: Does not the right hon. Gentleman think that it would greatly facilitate voluntary evacuation if this comfort were given to mothers, so that they could have closer contact with their children?

FREE POSTAGE (FRENCH SOLDIERS IN BRITAIN).

Sir T. Moore: asked the Postmaster-General whether he will consider allowing French soldiers stationed in this country to send their letters to France free, as is the law in their own country?

Mr. W. S. Morrison: I have already made arrangements to accord the concession which my hon. and gallant Friend has in mind. The concession covers unregistered letters up to 1 oz. in weight, and postcards, and corresponds with the concession already allowed by the French Post Office to British troops in France not served by our Army Post Office.

PARCEL POST (EGYPT).

Mr. Burke: asked the Postmaster-General whether he will take similar action to reduce the postal rate on parcels sent to members of His Majesty's forces in


Egypt as was taken in regard to the British Expeditionary Force?

Mr. W. S. Morrison: I think my hon. Friend must be under some misapprehension, because the reduced postage rates for parcels and correspondence sent to members of the British Expeditionary Force apply also to parcels and correspondence for all of His Majesty's Forces abroad, including His Majesty's ships in foreign waters.

POSTAL REVENUE.

Major Milner: asked the Postmaster-General whether he can give comparative figures showing the number of letters and postcards and the receipts for postage stamps before and since the introduction of the increased postage charges for any convenient period?

Mr. W. S. Morrison: The statistics asked for will not be available for some time yet; but I gave an indication of the postal revenue position in my reply to a Question by my hon. Friend the Member for Westhoughton on 22nd May, of which I am sending my hon. Friend a copy.

Major Milner: Do not these figures show the desirability of reconsidering the question of increased postal charges, which are causing more annoyance than they are worth?

Mr. Morrison: The reply to which I have referred indicates that, although there has been a decrease in the volume of postal business, it has been less than that which was estimated in the Budget statement.

Oral Answers to Questions — UNDERGRADUATES (FARM WORK).

Sir Patrick Hannon: asked the Minister of Agriculture the number of undergraduates at the Universities of Oxford and Cambridge who have volunteered for work on farms during the forthcoming harvest; and whether he has made an appeal to undergraduates in the other Universities of Great Britain and Northern Ireland to give similar service in their respective districts?

The Parliamentary Secretary to the Ministry of Agriculture (Mr. T. Williams): The authorities at all the principal Universities and University Colleges in England and Wales have been asked to assist

in enrolling students who are willing to work on farms during the summer vacation. My right hon. Friend the Secretary of State for Scotland has invited students of the Universities and other educational institutions in Scotland to volunteer and I am informed that a similar appeal has been made in Northern Ireland. The scheme was only made known to students last week and I am not yet able to say how many students at Cambridge have volunteered. At Oxford where recruiting has been going on for a longer period, the number of applications received is 168.

Sir P. Hannon: May I ask whether arrangements have been made by the Ministry to keep in constant contact with Universities in order to encourage the organisation of labour in this way continuously through the coming harvest?

Mr. Williams: Yes, Sir.

Mr. Edmund Harvey: Has the invitation also been extended to students at training colleges?

Mr. Williams: Yes, Sir.

Mr. George Griffiths: Is this to apply to Members of Parliament during their holidays?

Oral Answers to Questions — CIVIL DEFENCE.

EVACUATED CHILDREN.

27. Mr. Parker: asked the Under-Secretary of State for Dominion Affairs whether he will approach the Canadian and other Dominion Governments to see whether children and others willing to go can be evacuated to a place of safety in the Dominions?

The Under-Secretary of State for the Dominions (Mr. Shakespeare): The evacuation scheme now in operation in this country provides for the movement of school children accompanied by their teachers to safer areas in this country. Apart from the practical difficulties involved, a proposal to move individual children outside the country would introduce entirely different considerations and, as at present advised, my Noble Friend would not feel justified in making an approach to Dominion Governments on the lines suggested.

Mr. Parker: Will the hon. Gentleman bear this point in mind if a situation arises in which there is great danger in a large part of the country?

Mr. Crowder: Will my hon. Friend consider approaching the Dominion Governments with a view to their taking some of the aliens in this country, because we are getting very overcrowded?

Rear-Admiral Beamish: Will my hon. Friend bear in mind that the test of a nation is the capacity of the civil population to put up with hardship and peril?

Mr. Parker: asked the Minister of Health whether he is aware that many buildings earmarked for use as hostels by evacuated children who cannot be billeted in homes are in bad condition; that many local exacuation committees have been informed that such buildings, even if empty, may not be entered and repaired until evacuation has been ordered; and whether he will authorise authorities to proceed immediately with the necessary repairs?

The Parliamentary Secretary to the Ministry of Health (Miss Horsbrugh): In view of recent developments my right hon. Friend sent local authorities some days ago a circular, of which I am sending the hon. Member a copy, authorising them to incur necessary and reasonable expenditure on acquiring and equipping emergency hostels.

MOTOR MECHANICS.

Mr. Silkin: asked the Home Secretary whether he will take steps to ensure that local authorities will not be left without sufficient motor mechanics to maintain the vehicles required for Civil Defence purposes as the result of the recent appeal by the Minister of Aircraft Production for motor mechanics?

The Parliamentary Secretary to the Ministry of Home Security (Mr. Mabane): Yes, Sir. While this matter is primarily the responsibility of the local authorities, the Department will assist local authorities in every possible way to maintain this essential service.

ALIENS.

Captain Plugge: asked the Home Secretary whether he can give an assurance that every female alien domestic worker is known to the police; and whether he will consider making it a penal offence for an employer not to inform the police that he or she employs such a servant?

Mr. Peake: Every alien over the age of 16 is required to register with the police, and the occupier of any premises where an alien resides is required to satisfy himself that the alien has registered, and if not so satisfied to report to the police. Any failure therefore by an employer to see that the police have the requisite information is already an offence.

Viscountess Astor: Is it true that anybody born in an enemy country is an enemy alien?

Mr. Peake: That does not arise on this Question.

Sir Henry Morris-Jones: Is it not a fact that in certain rural areas in this country this Regulation does not seem to be known to the local police, and will my hon. Friend tighten the Regulation and make it more widespread?

Mr. Peake: The Regulation is certainly well known to the police, and I dare say that the effect of this Question and answer will be to make it better known to the general public.

Viscountess Astor: Will my hon. Friend be sure that it is known in the West Country, because at Plymouth, Devonport and so on, there are many domestic servants who are enemy aliens, and nobody has touched them?

ALLIES (RIGHTS AND PRIVILEGES).

Captain Plugge: asked the Prime Minister whether he will consider offering to grant, without any infringement of their sovereign rights, to all the countries who are fighting with us in the present war, the rights and privileges now enjoyed by the British Commonwealth of Nations?

The Lord Privy Seal (Mr. Attlee): I do not consider that it is opportune to pursue this question at the present juncture.

ARMED FORCES (IRISH VOLUNTEERS).

Sir T. Moore: asked the Prime Minister whether he will give the number of volunteers who have enlisted in the British fighting services from Eire and Northern Ireland, respectively, since 3rd September?

Mr. Attlee: The number of volunteers from Northern Ireland who have, joined the British Fighting Services from the beginning of September is approximately 10,860. As regards Eire, I regret that no figures are available giving the total number of volunteers.

Mr. Silverman: Can the right hon. Gentleman say what would have been the contribution from Northern Ireland had the National Service (Armed Forces) Act applied to that country?

SIR HORACE WILSON.

Mr. Mander: asked the Prime Minister what change there is to be in the functions hitherto performed by Sir Horace Wilson, other than those officially belonging to the Permanent Secretary ship of the Treasury?

Mr. Attlee: Sir Horace Wilson will perform the regular normal functions belonging to the Permanent Secretary of the Treasury.

Mr. Mander: Do I understand from that reply that he will not be personal adviser, to the Prime Minister?

Mr. Lyons: Is it not a fact that this officer was only obeying instructions given to him by a Minister?

Mr. Attlee: All civil servants carry out orders given to them by Ministers and Ministers are responsible for their acts.

Oral Answers to Questions — MINISTRY OF SUPPLY.

IRON AND IRON ALLOYS.

Sir Annesley Somerville: asked the Minister of Supply whether he has yet found out whether, and, if so, for what purposes, iron and iron alloys can be used, instead of steel, for war and peace purposes now that there is a shortage of steel?

The Minister of Supply (Mr. Herbert Morrison): The question of increasing the use of iron castings in place of steel is being actively pursued and in certain cases, such as in the machine tool and motor car industries, some substitution has already been made. It must be remembered that one main reason for the shortage of steel is the shortage of iron.

Mr. Kirkwood: Is the Minister satisfied that the Department gives consideration to individuals who submit alloys in place of steel, particularly with regard to shells?

Mr. Morrison: There are many proposals as to substitute materials, and I can assure my hon. Friend that we shall at all times be prepared to consider them.

ENGINEERING PRODUCTION.

Mr. Ellis Smith: asked the Minister of Supply (1) whether he is aware that it is the considered view of organisations who cater for engineering workers, that the best way to increase production is to restore the pre-1931 conditions and institute a three-shift system; whether consideration has been given to this; and what steps have been or are proposed to be taken;
(2) whether he is aware that the engineering trade unions consider that the best service is not being obtained from skilled and semi-skilled engineers; and what action is being taken to deal with this matter in order to expedite supply?

Mr. H. Morrison: My hon. Friend will be aware that full powers have been taken under the Defence Regulations to control war production undertakings. He may be assured that the questions of the most effective organisation as regards hours and shifts and the best possible utilisation of available skilled and semi-skilled labour are receiving careful attention.

Mr. Smith: Will my right hon. Friend consider the advisability of consulting the Minister of Labour in order that an early conference may be called of all the interests involved, with a view to securing maximum production?

Mr. Morrison: In the new circumstances, this is obviously a matter with which the Minister of Labour is also concerned, and my hon. Friend may be assured that I am in contact with my right hon. Friend about it.

ORGANISATION AND POLICY.

Mr. E. Smith: asked the Minister of Supply whether it is his intention to profit by the experiences of the Ministry of Munitions in securing the maximum supply with the minimum of cost and time; to organise the areas on a basis that was proved the best and to make all factories where orders are given controlled establishments; and whether he will make a statement on his proposed policy?

Mr. H. Morrison: The experience of the Ministry of Munitions will of course be taken into account so far as applicable to present conditions. My immediate policy


is, however, to secure the utmost possible production in the shortest possible time from all capacity that is now capable of production, and I cannot at present proceed with any reorganisation of long-term planning that might interfere with these vitally urgent needs. With regard to controlled establishments, a first list is now being drawn up and will be issued as soon as possible.

Mr. J. J. Davidson: May we take it that my right hon. Friend will not adopt the policy which has been adopted heretofore, of leaving these things in the hands of one big organisation and neglecting half a dozen other organisations, which are smaller but of a useful size?

Mr. Morrison: That is certainly a consideration which I shall keep in mind.

Mr. Cocks: asked the Minister of Supply whether he will make a statement on the present position of the area committees for the production of munitions; and whether he will consider giving these committees increased administrative and executive powers?

Mr. Morrison: I am not in a position to make any statement on this subject at present. In view of the transfer of central responsibility for the area organisation from me to my right hon. Friend the Minister of Labour and National Service, the whole question is under consideration.

Mr. Cocks: Are we to understand that the advisory committees of the former Ministry of Supply have been abolished?

Mr. Morrison: There were certain committees which advised the Minister of Supply, particularly in relation to labour matters but which, quite rightly, in the new circumstances have been transferred to the Ministry of Labour although the Departments concerned will be represented on them.

Mr. Cocks: The committees to which I was referring were those in various districts throughout the country representing employers and employés.

Mr. Morrison: I think they are the committees to which I referred.

UNEMPLOYED JOINERS (BELFAST).

Dr. Little: asked the Minister of Supply whether, in view of the letter which he and other Ministers have received drawing attention to the large

number of unemployed joiners in the city of Belfast and district who are prepared to do their part towards hastening victory, he will immediately take steps to have the services of these men utilised in every possible way in the national interest at a time when their skilled labour is so much needed towards the winning of the war?

Mr. H. Morrison: I am looking into this matter in conjunction with my right hon. Friend the Minister of Labour and National Service.

Dr. Little: May I ask what the Minister proposes to do in order to meet the serious situation which was brought to the notice of this House a few months ago, and is being aggravated week by week, in the case of these workers in Belfast? Surely there is some work available for them?

Mr. Morrison: I shall be anxious to provide useful employment for anybody who is without work, but I ought to point out that wood-work is not in the category of the most difficult items with which the Ministry has to deal. I am sure, however, that this matter will receive not only my attention but also the attention of the Minister of Labour in connection with the general mobilisation of the labour resources of the United Kingdom.

Mr. Burke: Is it not true that a large number of wood-workers are out of employment all over the country as well as in Belfast?

Mr. Morrison: I quite agree. I believe there is unemployment among wood-workers generally.

Sir Percy Harris: Is the right hon. Gentleman aware of the very serious distress and waste of energy which are being caused by this unemployment; and will he apply his mind to seeing whether these highly-skilled craftsmen cannot be employed in their own trade, or diverted to munitions work?

Mr. Morrison: Certainly the matter will be given attention, but the hon. Gentleman will appreciate that in the new circumstances it is very much a matter for consideration by the Ministry of Labour. My immediate business is to get the speediest output of the munitions which are actually required.

NON-FERROUS METAL CONTROL.

Mr. Stokes: asked the Minister of Supply whether he will state the terms of the arrangement entered into between his


Department and the British Metal Corporation for the running of the Non-Ferrous Metal Control; and whether any guarantee of profit has been given to that corporation and, if so, what?

Mr. H. Morrison: The British Metal Corporation receive an annual inclusive fee for their services in operating the Non-Ferrous Metal Control of the Ministry. The fee has been determined mainly by reference to the expenses incurred by the company, and no guarantee of the profit previously earned has been given.

Mr. Stokes: Is the Minister not prepared to tell the House what the fee is?

Mr. Morrison: Not without notice.

Mr. Stokes: I asked the Minister a specific Question about the fee. Surely that was sufficient notice?

Mr. Morrison: That is quite true, but I am not sure that it would be right to bring the figures before the House. [Hon. Members: "Why?"] I will give the matter consideration.

WASTE (SALVAGE, SUTTON AND CHEAM).

Mr. Wilfrid Roberts: asked the Minister of Supply whether he is satisfied with the steps that the Sutton and Cheam Borough Council have taken for the collection of waste?

Mr. H. Morrison: The Sutton and Cheam Borough Council have taken active steps to extend and improve their collection of waste materials, and their return for the month of April shows that the value of the material salvaged has more than doubled since December last. There is, however, room for considerable improvement before they equal the standard reached by many other boroughs.

Mr. Lyons: Can the Minister say whether any decision was reached at the meeting which he attended yesterday afternoon in relation to the appointment of compulsory salvage inspectors by all local authorities?

Mr. Morrison: I am afraid that I did not attend such a meeting.

Mr. Lyons: Is the Minister aware that the Parliamentary Secretary to the Ministry stated yesterday that the right hon. Gentleman was that day attending a meeting on this matter?

SCRAP METAL

Mr. Glenvil Hall: asked the Minister of Supply whether he will consult the Minister of Transport on the possibility of utilising for war purposes the standards placed at pedestrian crossings throughout the country, particularly where such crossings are plainly marked by studs or traffic lights?

Mr. H. Morrison: I have consulted my right hon. Friend the Minister of Transport in regard to this matter. Apart from the considerations of public safety which would be involved in the removal of the standards placed at pedestrian crossings, the relatively small tonnage of scrap material which would become available would not in present circumstances justify the labour of collection and of the necessary repairs to public footways.

Sir T. Moore: Is the right hon. Gentleman aware that the general public take no notice of these standards at the present time, and are guided only by the studs on the roads?

Mr. Morrison: I have opinions upon this matter but as I am not Minister of Transport, it would not be wise for me to give utterance to them.

Mr. Glenvil Hall: Would it not be possible to save labour by cutting off these standards level with the pavement?

Mr. Morrison: We will give consideration to that point, but the hon. Member will appreciate the fact that the Minister of Transport is very much concerned in this matter and I must take his view into account.

Mr. Cocks: asked the Minister of Supply whether steps are being taken to collect the iron railings in London and other parts of the country, wherever public safety permits, for conversion into scrap metal for war purposes?

Mr. Morrison: The question of utilising unnecessary iron railings as scrap has been constantly before my Department. Surveys have been carried out and representations made to the public authorities and private owners concerned in a number of cases, while a public campaign has been undertaken to persuade the general public to release railings for scrap. The action taken has been successful and the movement to give up railings is gathering momentum. If,


however, I am at any time dissatisfied with the progress which is being made, I shall be ready to take further steps.

Sir William Davison: Is the right hon. Gentleman aware that it has taken a war to secure the removal of the dangerous and unnecessary "shin" rails from Hyde Park; and will he do what he can to have them all removed as quickly as possible?

Mr. Morrison: I think that is a question for another Minister.

Major Milner: Is the Minister aware that iron railings are now being erected round certain factories in the Midlands?

Mr. Morrison: I would not like to express an opinion about that. There may be security reasons for it. If my hon. and gallant Friend will give me particulars, I will have the matter looked into.

Mr. Garro Jones: Will the Minister consider the collection of material in a sphere in which there is an infinitely greater shortage, namely that of aluminium products, used for household purposes?

Mr. Morrison: Yes, I will look into that.

Mr. Kirkwood: Is not this a glorious opportunity for the Minister to issue instructions that spiked railings should be done away with all over the country?

Mr. Morrison: I am not sure that spiked railings may not be very useful.

PAPER-MAKING MATERIALS.

Mr. Glenvil Hall: asked the Minister of Supply what steps he proposes to take to continue the manufacture of paper in this country by the use of materials available here or easily importable in order to prevent the purchase of large supplies of the finished article from abroad?

Mr. H. Morrison: Every effort is being made to develop to the fullest extent the home supplies of paper-making materials, chiefly waste paper, and so far as possible paper-making materials will be imported rather than paper.

GOVERNMENT CONTRACTS (FINANCIAL ASSISTANCE).

Mr. Levy: (for Sir George Mitcheson) asked the Minister of Supply whether his attention has been drawn to the financial difficulties facing many small contractors and sub-contractors to His Majesty's

Government, caused by the request of the Supply Departments to work overtime, night-shifts, and during week-ends, as a result of which such firms will experience difficulty in finding, for the time being, the cash needed to pay wages; and what steps he proposes to take to help such firms?

Mr. H. Morrison: The Ministry of Supply rely in the main on the banking system of the country to provide such financial assistance as is required by contractors to carry out their contracts, and action has been taken to secure the co-operation of the banks for the purpose. My Department is, however, always ready to advise any contractor who is in financial difficulties.

TANKS (CONSTITUTION OF BOARD).

Sir Geoffrey Ellis: (by Private Notice) asked the Minister of Supply whether he has given consideration to the position in regard to the supply of tanks?

Mr. H. Morrison: Yes, Sir, and I have decided, in consultation with the Secretary of State for War, to constitute a Tank Board to consider the whole situation regarding the production and design of tanks and to advise me as to the action required. The Board will be asked to proceed with all expedition in dealing with this urgent and vital matter. I have secured the services of Sir Alexander Roger as Chairman of the Board. I have also secured the services of Mr. Durrant, a chief engineer under the London Passenger Transport Board; Mr. Moyses, managing director of the Birmingham Railway Carriage and Wagon Company, Limited, and Mr. G. W. Thomson, member of the General Council of the Trades Union Congress. Further members will be appointed to represent the War Office and Ministry of Supply and their names will be announced shortly.

Mr. Thorne: I take it that the Government have taken notice of the havoc by German tanks on the Western Front and that they will speed up production?

Mr. Morrison: It is obvious that the experience gained during recent hostilities must be taken fully into account.

Oral Answers to Questions — FOOD SUPPLIES.

CONTROL COMMITTEES (APPOINTMENTS).

Mr. Daggar: asked the Parliamentary Secretary to the Ministry of Food


whether instructions have been issued against members of local authorities accepting appointments under food control organisations?

The Parliamentary Secretary to the Ministry of Food (Mr. Boothby): I would refer the hon. Member to my reply on Thursday last to a similar Question by the hon. Member for Normanton (Mr. T. Smith).

BREAD.

Mr. De la Beère: asked the Parliamentary Secretary to the Ministry of Food whether, in connection with the in crease in the price of bread which has been recommended by the London Joint Bread Price Committee on or after 20th May, he can state what percentage of this proposed increase will be passed on to the bakers?

Mr. Boothby: I presume my hon. Friend refers to the recent increase of ¼d. in the price of the 1 lb. loaf in the London area recently recommended to bakers by the London Joint Price Committee. In so far as effect is given by bakers to this recommendation the increase of price will accrue to those bakers.

Mr. De la Bère: Is the Minister aware that unless problems are solved at their roots they beget other problems, and it then becomes incumbent to solve those other problems?

Mr. Boothby: Yes, Sir.

Mr. De la Bère: asked the Parliamentary Secretary to the Ministry of Food whether he can now make some statement regarding the Government's intentions over the introduction of national or standard bread throughout the country?

Major Carver: asked the Parliamentary Secretary to the Ministry of Food whether he is satisfied with the present position with regard to the nutritive value of bread generally sold to the public in this country; whether he has yet been able to consider the recommendation sent to him by a group of Members of this House interested in the scientific aspect of this matter; and whether he proposes to take any steps in the matter having regard to the desirability of enabling the public to obtain the maximum nourishment from bread?

Mr. Boothby: The whole question of the nutritive value of bread is now under consideration and I am not at present in a position to make any statement.

Sir Francis Fremantle: Has this question not been settled 20 years ago?

Mr. Boothby: Not so far as I am aware.

Commander Locker-Lampson: Is this not a most important issue?

ANIMAL FEEDING-STUFFS (NORTHERN IRELAND).

Dr. Little: asked the Parliamentary Secretary to the Ministry of Food whether, in view of the facts and figures placed before the Ministry regarding the shortage in the delivery of feeding-stuffs to Northern Ireland since the beginning of this year, he will make arrangements for the supply of the promised quota to Northern Ireland, thus placing it on a par with Great Britain?

Mr. Boothby: Since 1st February the proportion of pre-war supplies of maize and barley allocated to Northern Ireland has been slightly higher than the proportion allocated to Great Britain, but it has not been possible to make up the January deficiency. I have communicated with my hon. Friend in reply to the letter he addressed to me on this subject, and I am having further inquiries made.

Dr. Little: Will the Minister give a promise that as early as possible he will make up the deficiency for January?

Mr. Boothby: Yes, Sir, as early as possible.

COLD-STORAGE ACCOMMODATION.

Dr. Little: asked the Parliamentary Secretary to the Ministry of Food whether, in view of the prospective erection of cold-storage depots in Great Britain, he will arrange to have at least one such depot erected in Northern Ireland where the conditions are so favourable for cold-storage purposes?

Mr. Boothby: I regret that it is not practicable to adopt my hon. Friend's suggestion. The existing cold storage space in Northern Ireland is more than sufficient to meet the needs of local consumption.

Dr. Little: Arising from that answer, may I point out that I am informed other-


wise? In view of the situation with which we are faced, we feel that the Ministry should give us more storage facilities in Northern Ireland.

Major Carver: asked the Parliamentary Secretary to the Ministry of Food whether he is satisfied with the present volume and utilisation of cold-storage accommodation in this country; and what steps he is taking to offer reasonable inducement to private enterprise to increase their cold-storage capacity on a temporary or permanent basis?

Mr. Boothby: I am satisfied that the cold storage accommodation at present available is being used in the best manner. Accommodation is being increased as quickly as possible by the erection of new Government cold stores and by inducements to cold store proprietors to build new cold-storage space.

EMPIRE SUGAR IMPORTS.

Major Carver: asked the Parliamentary Secretary to the Ministry of Food what is the approximate proportion of our sugar imports which are now being obtained from Empire sources; how this proportion compares with that at a similar date in 1939; and whether he anticipates that it will shortly be possible to obtain all our requirements of sugar from the Empire?

Mr. Boothby: Arrangements have been completed for the purchase of the entire exports of the coming season's sugar crops of Australia, the Union of South Africa, Mauritius, Fiji and the British West Indian Colonies. The total quantity involved is about one and three-quarter million tons, of which the United Kingdom proportion is about one and a quarter million tons. Arrivals of this sugar in the United Kingdom will be spread over a long period, beginning in about two months and do not therefore affect the immediate sugar supplies.
Canada and New Zealand are partners with the United Kingdom Government in these purchases, and both Dominions have shown the utmost co-operation throughout the negotiations, whilst the arrangements have been much facilitated by the helpful attitude of the exporting Dominions and Colonies concerned. Supplies of foreign sugar are only purchased to supplement, as necessary, deficiencies in supplies from Empire sources and this policy will be continued for the

future. In the circumstances no useful conclusion would be drawn from a comparison between present and pre-war figures.

BUTTER (PRICES).

Sir Richard Acland: asked the Parliamentary Secretary to the Ministry of Food whether he has considered cases in which large retail firms are selling national butter at 1s. 6d. per pound, whereas small shops, who cannot purchase supplies at less than 1s. 5d., can hardly sell at less than 1s. 7d.; and how he proposes to deal with them?

Mr. Boothby: I am aware that national butter is being sold by certain retail organisations below the prescribed maximum price of 1s. 7d. per pound. This is clearly in the consumers' interest and it is not desirable to take any step which would have the effect of increasing the cost to the consumer.

Sir R. Acland: Could not an effort be made to supply small retailers with butter at 1s. 5d. and to allow them to sell it at a higher price?

Mr. Boothby: My Noble Friend is not, I think, prepared to take any steps which would have the effect of raising prices for the consumer.

Mr. G. Griffiths: Will the Minister say that the price of butter will not go up any higher, because, if it does, the poorer sections of the community will be able to have nothing more than margarine?

Mr. Boothby: We are doing our best to see that no prices go up.

Mr. Silverman: If it is possible for some firms to sell national butter on an economic basis at 1s. 6d. a pound, would it not be possible to arrange the distribution of butter so that everyone could purchase it at that price? What justification is there for one section of the population paying 1s. 7d. per pound for butter and another section paying 1s. 6d. per pound?

Mr. Boothby: The element of competition comes in, which I do not think is unhealthy; but the whole question of trade margins is under consideration.

Mr. Silverman: Why should the poor consumer pay for the competition?

PRICE CONTROL.

Mr. Lyons: asked the Parliamentary Secretary to the Ministry of Food what


steps he proposes to take to subject to price control those articles of foodstuffs in common use that are not subject to control by the Minister of Food, and which are not covered by any order yet made under the Prices of Goods Act?

Mr. Boothby: By far the larger part of foodstuffs in common use is controlled either by a Maximum Price Order or by some other means. Control will be extended where practicable and necessary to other foodstuffs of the kind described by my hon. and learned Friend as soon as possible.

Mr. Lyons: Has the Minister received certain complaints, particularly from the North Regional Prices Committee, with regard to high prices of foodstuffs not yet controlled? Does he not think that after nine months of war it is time to put an end to these many vexations?

Mr. Boothby: Yes, Sir, these questions are under consideration and action will be taken as soon as possible. I would remind my hon. and learned Friend that charges of profiteering can be brought under the Prices of Goods Act.

Mr. Lyons: Is the Minister aware that unless a commodity is subject to the Prices of Goods Act Regulations it is difficult to find anyone who can take action? Will he consider, on behalf of the people who are paying these prices, taking action forthwith?

Mr. Boothby: I shall be very glad if my hon. and learned Friend can give me any instances.

Mr. Thorne: Is the Minister taking note of the extraordinary price charged for tomatoes? In some cases they are being sold at 1s. 6d. a pound.

Oral Answers to Questions — UNEMPLOYMENT INSURANCE (NEW ENTRANTS).

Mr. Levy: (for Sir Herbert Williams) asked the Parliamentary Secretary to the Ministry of Labour whether he can state the number of people who have become insured under the Unemployment Insurance Acts for the first time during the last eight months and the corresponding figures for a similar period for a year previously?

The Parliamentary Secretary to the Ministry of Labour (Mr. Assheton): Dur-

ing the eight months September, 1939, to April, 1940, the number of new entrants to Unemployment Insurance in Great Britain was approximately 813,000. The corresponding figure for the period September, 1938, to April, 1939, was 547,000.

Oral Answers to Questions — LOCAL DEFENCE VOLUNTEERS.

Mrs. Tate: (by Private Notice) asked the Secretary of State for War whether adequate numbers of volunteers have been enlisted for the defence of London and whether those volunteers are armed with defensive weapons issued by the War Office or with weapons provided by themselves?

Hon. Members: Where is the Minister?

Mrs. Tate: On a point of Order. May I not be allowed an answer to the Question, of which I gave notice yesterday?

The Parliamentary Secretary to the Treasury (Captain Margesson): I can only express my regret to the hon. Lady that the right hon. Gentleman does not appear for the moment to be in his place. I can offer no explanation but only say that I regret it and will see that an answer is sent to the hon. Lady as soon as possible.

Mr. J. J. Davidson: On a point of Order. I always understood that a Private Notice Question was one that could not be answered in the ordinary course of House of Commons procedure. May I ask whether this Question was considered by you, Mr. Speaker, and accepted as one that could not be answered in the ordinary course of procedure?

Mr. Speaker: The hon. Member must remember that we are now in Question Time; it is only now half-past Three and any Question of which notice has been given can be answered up to a quarter to Four.

Mrs. Tate: As I have had no answer to my Question and it is a matter of some moment, and as I was informed yesterday at 5.30 that volunteers in London are not allowed—

The Financial Secretary to the War Office (Mr. Law): I must apologise to the hon. Member, but I have had no notice of any Question from her for this afternoon.

Mrs. Tate: Perhaps the Financial Secretary would prefer that I should ask the Question again or raise the matter on the Adjournment?

Mr. Speaker: The Question had better be postponed until to-morrow.

Mrs. Tate: I will postpone it until to-morrow.

PALACE OF WESTMINSTER.

SECURITY ARRANGEMENTS.

Mr. Speaker: I wish to inform the House that it has been considered necessary to bring into force special Security Arrangements for the Palace of Westminster.
Permanent passes will be available at the Admission Order Office after noon to-morrow for all Members of Parliament, Officers of the House, and such other persons as have regular employment or business in the House. I must ask every Member to apply individually for one of these passes as soon as possible; they are signed by the Lord Great Chamberlain.
A paper giving full details of these arrangements will be issued to every Member from the Office of the Chief Government Whip, so I do not propose to describe them in further detail now.
The entrance to Westminster Bridge Station by way of the Colonnade and subway will be closed after to-morrow; but for the convenience of Members and Officials, it will be opened for exit only for 30 minutes after the rising of the House, on days when the House meets.
I am sure I may ask for the co-operation of all Members in strictly carrying out these necessary arrangements, though I realise that they may cause some inconvenience to Members and their friends.

Sir Joseph Lamb: Has any decision been arrived at with regard to the public galleries, whether the public are to be allowed in and whether precautions will be taken in that respect?

Mr. Speaker: The hon. Member had better wait until he sees the regulations which have been drawn up.

Mr. R. C. Morrison: Is it intended, when Members apply for their passes, to ask them to surrender the passes they already hold, in view of the fact that it is undesirable that Members, who have passes which were issued some months ago, should have more than one pass?

Mr. Speaker: I think that the passes referred to by the hon. Member are voluntary passes and not specially with a view to admittance to the precincts of the House.

Mr. Garro Jones: Whether those passes are official or unofficial, is it not desirable, since they are signed by the Serjeant at Arms and bear the stamp of the House of Commons, that they should be withdrawn before new passes are issued?

Captain Plugge: Were not those passes issued only in view of the evacuation scheme?

Mr. Levy: Did I understand correctly that although we can go out by the Colonnade to Westminster Station, we are not permitted to come in by that way?

Mr. Speaker: Members are only permitted to go out by the subway for half-an-hour after the House rises.

Mr. Lunn: May I ask whether you have seen the pass issued by certain Ministers to Members, who are told that Ministers cannot be interviewed unless Members are in possession of one of them?

Mr. Speaker: I think that is dealt with in the regulations.

Mr. Garro Jones: Members of the House are in possession of official passes signed by the Serjeant at Arms and stamped with the House of Commons stamp. Seeing that the issue of new passes is about to begin, would it not be better to say that they shall not be issued until the old passes are returned?

Mr. Speaker: That is not a compulsory but a voluntary pass. It is, however, unwise to have a multiplicity of passes and Members had better surrender the old ones.

Mr. Garro Jones: I should have thought that it was obvious to every Member that the old passes, if not surrendered, may be lost or misused, making the system more dangerous than if no passes were issued?

Mr. Speaker: That is why I said that it would be better to surrender them.

Mr. Thorne: Was not one of the reasons why these special passes were issued to assist Members when they are travelling about?

Mr. Speaker: It would be better to surrender those passes when the new ones are issued.

Mr. Leach: Are we to take it that a careless Member arriving without his pass will be refused admission to the premises?

Mr. Speaker: There are a good many questions that I could not answer.

BILL PRESENTED.

SUPERANNUATION SCHEMES (WAR SERVICE) BILL,

"to enable provision to be made for preventing loss of benefits under certain superannuation schemes by persons undertaking service in the Forces or employment for war purposes," presented by Mr. Assheton; supported by Sir Andrew Duncan, the Attorney-General and Captain Crookshank; to be read a Second time upon Tuesday next, and to be printed. [Bill 55.]

BUSINESS OF THE HOUSE.

Ordered,

"That all the remaining stages of the National Loans (No. 2) Bill may be taken at this day's sitting, notwithstanding the practice of the House relating to the interval between the various stages of such a Bill, and that immediately after the Bill has been read a Second time, it shall be considered in Committee of the whole House."—[Mr. Attlee.]

Orders of the Day — FINANCE BILL.

Order for Second Reading read.

3.41 p.m.

The Chancellor of the Exchequer (Sir Kingsley Wood): I beg to move, "That the Bill be now read a Second time."
The discussions on the Budget Resolutions have already covered a wide range, and, before dealing generally with some considerations respecting our finance and war, I propose to-day to refer only to three or four main provisions of the Bill which are of some importance and upon which further explanations will, no doubt, be regarded as desirable.
As the House knows, five separate enactments are necessary to implement the Budget proposals. There is this Bill, which embodies the increases in normal taxes, and legislation for the amendment and improvement of the current tax law. It includes, for example, the increased duties on beer, spirits, tobacco, matches and mechanical lighters and the raising of the standard rate of Income Tax to 7s. 6d. The postal charges will require a separate piece of legislation save in so far as they have been imposed by warrant or regulation, like the increase in ordinary postal rates. The limitation of dividends is already the subject of discussion in another Bill in this House. There will need to be a Measure to implement the undertaking to exempt from the operation of the means test new savings lent to the nation during the war up to a total of £375. There is also the Bill to provide the legislative machinery for a Purchase Tax. The only proposal made in regard to it and the basis on which the House passed the appropriate Resolution was that the necessary machinery should be enacted and power taken for Parliament to impose an actual duty by an affirmative Resolution of the House upon a Treasury Order. It has already been stated that the first step in this connection must be a careful technical study, in consultation with business interests, in order that it may be ascertained that machinery can be devised which will fit in with the general framework of industrial and commercial practice, and these consultations are now taking place.
The Finance Bill is long, and many parts of it are of a complicated character, but three subjects account in the main for its bulky character. First, there are numerous new provisions relating to the Excess Profits Tax, many of which cannot, I am afraid, be expressed otherwise than in long and technical phrases. When the main proposals were dealt with last autumn it was recognised that there must be many rough edges which would have to be smoothed off after experience had been gained and representations heard from the taxpayers affected. The new provisions to which I refer are the result of long and careful consideration of the nature of the inequalities and hard cases which, as we believe, need to be reasonably met.
There is also, in addition to the matters relating to the Excess Profits Tax, a long and technical passage dealing with certain methods of evasion of Estate Duty. I think it will be accepted in all quarters of the House that artificial and legal devices which frustrate the equal incidence of an important tax ought to be dealt with in order that all may contribute their proper share, the necessity for which was never greater than it is to-day.
There are also provisions by which certain rents which are not at present adequately dealt with are to be the subject of taxation. Clauses 13 to 18 deal with this subject, which I may for convenience describe as the taxation of excess rents, that is, rents not adequately taxed under the law. Although I am afraid that here, again, the wording of the Clauses is necessarily technical, the object to which they are directed can be briefly described. They are three in number. First, it is proposed in cases where a property is unoccupied, but a rent there for is being paid to the landlord, to secure payment of tax on the rent so paid. It is perhaps rather curious, but as the law stands to-day no tax is payable if the property is empty; the rent paid escapes tax in the hands of the recipient. That, I think, is a result which is quite indefensible and it is proposed to remedy it. Secondly, it is proposed in cases where rents for property are paid and those rents exceed the Schedule A assessment of the property to charge the excess to Income Tax. This proposal extends to what I may refer to for convenience as short leases, where the lease is for a period not exceeding 50 years. The types of case in which rent


in excess of the Schedule A assessment escapes taxation are, it is true, limited in number, but very often, I am informed, large amounts are involved, and it is only right that the recipient of the rent should bear tax upon the amount which he actually receives. I should like to add in connection with all these provisions that there is nothing in them which in any way affects the existing right to claim reduction of a Schedule A assessment or the right to claim relief in respect of maintenance and repairs.
The third proposal is directed to removing a long-standing anomaly relating to the deduction of tax from ground rent and other rents payable under leases granted for a period exceeding 50years. It frequently happens that in such cases the rent payable greatly exceeds the Schedule A assessment on the property, but as the law stands to-day the recipient of the rent escapes tax on such excess, and the payer of the ground rent can only deduct as a charge in computing his total income an amount equal to the amount of the assessment. It is proposed to remedy the position by putting rents payable under long leases in the same position, as regards deduction of tax, as other charges on income such as mortgage interest. The result will be that the payer of the rent will not himself bear tax on the amount of the rent, while the recipient of the rent will bear standard rate, and Surtax, on his full income, as indeed ought to be the case.
I would refer briefly to certain provisions contained in Part III of the Bill, in relation to the Excess Profits Tax and the National Defence Contribution. Part III contains detailed provisions covering technical points, mostly of a minor character, relating to the Excess Profits Tax, and one or two minor Amendments in relation to the National Defence Contribution. It can be said that the provisions in relation to Excess Profits Tax last year, certainly so far as I have been able to judge from the discussions at that time, have never been regarded as in their final form. It has always been accepted that they would be subject to amendment and review in the present Bill. The provisions of the Bill are the result of careful examination and also in response to representations made to us. Our object is to make the tax more workable and equitable between one type of business and another. At the same time, opportunity has been

taken to make the machinery more efficient for the collection of the tax, particularly in the case of parent and subsidiary companies.
Perhaps I might now refer for a minute or two to what I regard as perhaps the most important of the Amendments now proposed, that which is contained in Clause 26, which substitutes a new provision in place of Section 13 (7) of the Finance (No. 2) Act, 1939. Hon. Members will no doubt remember that that Subsection conferred powers on the Board of Referees to allow a substitute standard when the figures of past profits would not constitute a reasonable standard. In that Sub-section it was intended to deal with cases of hardship, but it was criticised in the Finance Bill Debates last autumn as affording inadequate relief to the depressed industries and on the ground that it operated unfairly as between one business and another.
There is one particular criticism which, I have no doubt, the right hon. Gentleman will remember, and that was in relation to the limitation imposed of a percentage calculated in relation to share capital. That was criticised on the ground that share capital is arbitrary and in many cases does not adequately represent the real value of the trading assets. It was also represented that where, in addition to the original capital subscribed by the shareholders, there were reserves built up out of past profits, and the real value of the trading assets proved the existence of those reserves, it was not fair that the percentage should be given on share capital only. That was the basis of the criticism. I think the case was stronger still, as it was put, in regard to private companies, because there, I think, you find the amount of share capital much more haphazard. It was stated that unfairness would ensue if share capital were not amended to some other basis which would, at any rate, reflect the capital actually at stake in the business, as shown by the assets at the time.
The new provisions in Clause 26 are designed to meet those criticisms. I would point out that the Clause applies to the special cases which have to satisfy two conditions. They are that there were losses in the standard period or that the profits were so low as not to afford a reasonable standard. The Clause first provides that the Commissioners of Inland Revenue may give a substituted


standard, but not exceeding a percentage on share capital, for the standard period. That is the first proposal. Then it is suggested that any taxpayer who is dissatisfied with the determination of the Commissioners of Inland Revenue can appeal to the Board of Referees. That is the first limb of the new provision. If the Board of Referees are satisfied in any particular case that the paid-up share capital does not fully represent the value of the trading assets, they may award a higher standard, not exceeding the amount that would reflect the capital actually at stake in the business, as shown by the assets at the time. They will receive the appropriate percentage on the value of the trading assets in the standard year. This will enable a higher standard to be claimed in cases where, for instance, reserves have been built up in the past, and are employed in the business, but there has been no corresponding increase in the share capital.
Finally, there is a special provision for concerns that belong to a depressed industry, during the standard period. In such cases it is true it may be contended that the value of the trading assets in any standard period does not provide a satisfactory criterion, since it might very well be said that, owing to the depressed state of the industry, the value of the trading assets of concerns in the industry would also probably be, in their turn, depressed. For this reason, to deal with the special cases which I think it is generally agreed should be met, it is proposed that the Board of Referees should be permitted in these depressed industry cases to award a standard exceeding the percentage on the value of the trading assets in the standard period. There will be, however—and this, of course, is necessary—a maximum limit to the amount which the Board of Referees can award, and the amount which is fixed can be defined in this way. It is the appropriate percentage on the capital employed in the business in the standard period as computed for excess profits purposes after excluding any dead wood in the capital, or, to put it in other words, excluding any asset the value of which has been permanently lost. This means in effect that concerns within the depressed industries can be awarded a standard up to an amount not exceeding the percentage on

the written-down value of the assets of the business in the standard period. I hope that this will meet the case which has been strongly pressed upon the Treasury, because I think everyone will agree that it is vitally important in the case of an Excess Profits Tax that depressed concerns and firms in the development stage should be able to obtain a reasonable and satisfactory standard. I hope industrialists will agree that by these new provisions we have gone a long way towards meeting the quite legitimate criticism that has been advanced against the provisions already on the Statute Book. I will only, in conclusion, in dealing with this Part of the Bill, remind the House that the Board of Referees, upon whom this important duty falls, have been appointed to adjudicate on what I agree is a very important matter, and they have a considerable responsibility. The House will remember that they are a body of experienced men, who will be able to bring to bear on the problem, as they have done in the past, great expert knowledge of business organisation and finance.
While I am speaking of the Excess Profits Tax, I will take the opportunity of referring to a particular and immediate question which I have at present to consider in relation to the tax. The House will recall the recent statement of the Lord Privy Seal, when he made it clear that undertakings which have been declared by the Minister of Supply to be controlled undertakings will pay Excess Profits Tax at 100 per cent. These are undertakings which, in terms of the recent Regulations, are or will be principally engaged upon war production. That was the extent of the decision definitely reached at that time. But the question arises whether, in the grave times through which we are passing, all other trades and businesses should not pay the tax. I have now considered this and have reached the conclusion that it is right that they should do so. In the first place, I think that if we are to have differential rates of Excess Profits Tax for different classes of undertakings, it is an extremely difficult and invidious task to make a fair and equitable distinction between those who should pay the higher rate and those who should pay the lower. Industry, after all, in a modern State, is a very complicated instrument, and one type of concern merges into another through a great series of gradations.


Secondly, I believe that in these times it will accord with the general views of all, including, I venture to believe, the views of industry itself, that excess profits in business in war-time should be ruled out altogether, whether the business is engaged on war production or on any other kind of activity. Accordingly, I shall shortly introduce a Resolution applying to all trades and businesses the Excess Profits Tax of 100 per cent., with effect from 1st April last.

Mr. Holdsworth: The right hon. Gentleman has made a very important announcement. Has he considered the alteration of the £3,000 limit for a certain number of directors? Will he think of that when taking this further step?

Sir K. Wood: I will consider that, and I shall be anxious to hear any arguments on the Resolution.

Mr. Stokes: Does this apply to private businesses as well as public?

Sir K. Wood: It applies to all trades and businesses as covered by the original provisions in relation to Excess Profits Tax.
I would now like to say a word about the various provisions in the Bill in relation to Estate Duty. They are directed to strengthening the existing law in combating various schemes which have been evolved from time to time for the avoidance of duty. Some of the schemes are new, and others have already been the subject of legislation, which it is now found necessary to amend as it has proved inadequate. The Clauses in the Bill carry out the proposals announced in the Budget speech and are founded upon the Resolutions already passed by the House. No doubt any particular proposals can be discussed in detail on the Committee stage, but I hope and believe that the House will be prepared to approve them in principle, because they are proposals designed to strengthen our defences against tax evasion in the sphere of Estate Duty.
I now want to say a few words in relation to our finances generally. It is true that we are raising in taxation this year the largest sum in our history, but I feel that the House will agree when I say that nothing short of the maximum effort, both financially and in the factories

and workshops, will suffice to enable our men to beat back the forces by which they are opposed. Certainly I must inform the House this afternoon that we must contemplate an ascending expenditure commensurate with the dangers of the times and be prepared, I have no doubt willingly, for further burdens and sacrifices, little indeed, whatever they may be, in comparison with all that has been so bravely undertaken by our sailors, soldiers, and airmen. In introducing the Budget, my predecessor was contemplating a war expenditure in the first six months of this year of rather less than £1,000,000,000. For the whole year he took a round figure of £2,000,000,000 or thereabouts, owing to the impossibility of seeing far ahead with sufficient clearness to form a definite estimate. In his Budget speech Lord Simon emphasised that the figure of war expenditure was principally affected by such factors as man-power and the supply of war materials, and in a later statement he enunciated the principle that we would put no limit on what we had to spend, because we must at all costs put forward our maximum possible effort.
I must tell the House—in fact, the House knows—that since those statements were made and that computation was given the whole situation has undergone a vast change, and everything shows that there will be a greater national expenditure upon the war. The acceleration of the speed at which the war is being conducted has clearly rendered untrustworthy the previous estimates that have been made of our probable rate of war expenditure. It is obviously impossible at this moment to give any revised estimate, but whatever is necessary will, I am sure, be willingly found and paid. The question has been put, and it now arises, whether here and now further taxation should be imposed, apart from the Purchase Tax and the new 100 per cent. rate of Excess Profits Tax. I do not think anyone will deny that the increased taxes and the new taxes proposed in the September Budget and the present Budget were not only enormous in themselves but have also followed a succession of very heavy increases imposed in the immediately preceding years. In fact, the total revenue from taxes has risen from £765,000,000 in 1936–37 to £1,200,000,000 to-day. These burdens will be borne unflinchingly by the country, but I must tell the House that


I have no doubt that it will be necessary to increase them further in the near future. But the advance in taxation has been so swift that I think it is essential to afford some short period, at any rate, during which the country can adjust itself to the considerable burdens already placed upon it. I also feel that nothing which will help us at this time should stand in the way, and I know that our people will not flinch from any further taxation which it may be necessary to impose. We must always remember in that connection that as taxation affects both producers and consumers, adjustments are necessary on both sides and a little time, however short it may be, is valuable.
I am glad to say that we may hope for some increase in yield of taxation beyond our former estimates, but it is also clear that the latest developments in the situation have increased the need for borrowing. Our object must continue to be to secure in the greatest possible degree that the vast expenditure with which we are faced, so far as it is not met by taxation, is met out of the genuine savings of the community placed freely at the disposal of the State. I hope and believe that the recent action which the Government have taken in so many directions will make it easier for our people to lend. I think we can certainly anticipate that more people will be put into employment, and that with extended hours of work salaries and wages will amount to a greater sum. At the same time it is clear that civilian consumption must be strictly controlled and that we shall not be able to permit either production at home or the import of any increased quantities of non-essential goods. Under these conditions there should be in the hands of the people more money which they are in a position to lend to the country; and I may say that it is even more the duty of the wealthier people and the great institutions to save in the greatest possible degree and to place their savings at the disposal of the State, holding them for the purpose of subscriptions to new National War Loans. I am now considering what would be the best shape for our future War Loans. No one need be under any doubt that he will have abundant opportunities for lending to the State.
So far as small savings are concerned, it is more than ever important to-day that the considerable flow of investment in

National Savings Certificates and Defence Bonds, together with money deposited with the Post Office and Trustee Savings Banks, should steadily increase. In case there should be any doubt left in any man's mind, let me state that there is nothing in the new powers of the Government over persons and property which endangers money in any bank. That will be as safe as it has always been. Equally, there is nothing to endanger savings in any way. On the contrary, the more firmly and resolutely we knit our efforts together in this great struggle, the safer and the more valuable will our savings be. The War Savings Campaign under Sir Robert Kindersley and the National Savings Movement, I am glad to say, pursues its successful course. The figure of small savings in Savings Certificates and Defence Bonds and the increase in balances in the Savings Banks since the campaign began last November amounts to-day to more than £180,000,000. Recently the weekly figure for these savings has averaged more than £5,000,000. It is gathering momentum; it must be continued and must also be matched with a like spirit in all sections of our community.
I would say, in conclusion, that savings, of course, imply abstention from unnecessary expenditure. It is vital that the man-power and material resources of the community should be devoted to the supreme effort, and by abstaining from unnecessary expenditure people and institutions will make a considerable contribution to this vital objective. In commending this Bill to the House, I recognise that it imposes many heavy burdens on all sections of the community. We must at the same time realise that others may have to be shouldered, but I believe that they will be borne willingly and cheerfully in order that all may play their part in preserving justice, liberty and freedom, not only for this generation, but for those who follow us and for mankind.

4.22 p.m.

Mr. Pethick-Lawrence: I have no intention of following the right hon. Gentleman in his description of the detailed Clauses of the Bill in the earlier part of his speech. However much it was right and proper for him to take that course, I am sure that the House has no wish to hear it all over again from me. The right hon.


Gentleman showed just that amount of interest in the actual terms of the Bill which one would expect from a step mother who was having to foster and bring up the four—or is it five?—rather tiresome brats left by her predecessor. One of these five children was brought forward last week and proved a little bit more troublesome than its previous reception had suggested. Another, dealing with newspaper postage rates and telegraph charges, will cause some wry faces, I have no doubt, when the time comes, but as we have already had the major part of the burden in the shape of the ordinary postal rates, I expect that the right hon. Gentleman will have no great difficulty in carrying it through this House. The third of the brood, the Purchase Tax, came into the world without any blessing from any part of the House and met with definite opposition from myself and those Members with whom I am especially associated. While I have every wish to give support to the Government, I think it only right and helpful to warn the right hon. Gentleman that if he wishes to have a harmonious passage for that Bill, we shall certainly expect very substantial modifications in its main basis, because, in the opinion of some of us, some of the principles on which it was based in the form in which it was announced by his predecessor are unsound. But to-day we are not concerned with those Measures. I shall not refer to them again except that some general ideas of taxation which I shall lay down have special relevance to the last-named proposal.
To-day we are concerned with this Finance Bill proper, and the discussion of it usually carries a broad interest in the whole financial situation. I was, therefore, very glad that in the second half of his speech the right hon. Gentleman went beyond the terms of the Bill before the House and dealt with a matter that is of great importance—the prospects of the future. So far as this particular Bill is concerned, there is nothing very new to say about it. The complicated provisions which are the evasion Clauses will obviously be better discussed when we come to the Committee stage. With regard to E.P.T., the right hon. Gentleman made an announcement to-day of considerable importance. I was wondering what attitude he would take towards that tax, and I understand that he has now decided that the 100 per cent. pro-

vision shall apply to all those cases where the 60 per cent. provision applied before. I understand him to tell us that it will be necessary to introduce a Ways and Means Resolution; either now or later, perhaps he will tell me whether it is intended that that Resolution shall be passed and that the new provision shall be incorporated in the Bill as we have it to-day, or whether it is intended to bring in another Finance Bill in order to incorporate it.

Sir K. Wood: No, the former.

Mr. Pethick-Lawrence: I thank the right hon. Gentleman for informing me that it is intended to carry a new Resolution and incorporate the Resolution in the Finance Bill before we reach the further stage of the Bill. Having dealt with those provisions, we are left with the new burdens, and of those that were not foreshadowed last year nearly the whole consist of indirect taxation. They are heavy but not unbearable, and they were accepted by hon. Members in all parts of the House as the financial counterpart of the late Government's leisurely view of the war. Since the right hon. Gentleman, now Lord Simon, was Chancellor of the Exchequer we have had a new Government, we have had a new policy, a new drive, a new alertness and a new gravity. I am glad to hear from the right hon. Gentleman that those are to be reflected in new finance. Last Thursday the right hon. Gentleman used a phrase which was commented on by my hon. Friend sitting behind me. He said:
…the general balance between taxation and borrowing will be maintained."—[OFFICIAL REPORT, 23rd May, 1940; col. 379, Vol. 361.]
I think the right hon. Gentleman has explained to-day that that does not mean that he will limit his taxation proposals to the same basis as was brought forward by his predecessor. I will not ask the right hon. Gentleman how much he expects the annual expenditure of the country to be. He said that his predecessor had put down £2,000,000,000 as the rough cost of the war in a year, with some £600,000,000 for the other expenditure of the State. The right hon. Gentleman is too newly come to his office to attempt—if, indeed, anyone could attempt—to put a figure to the expenditure of the country; but I will tell him what the country expects. The country


expects, in the first place, that not one penny will be wasted or misapplied, and that not one penny will be spent in bribing any members of the community to do their duty; it expects that there will be an immediate and immense increase in the economics of war effort, and, therefore, in the financial sacrifices which will make that possible. The Prime Minister said, a fortnight ago:
I have nothing to offer but blood, toil, tears and sweat."—[OFFICIAL REPORT, 13th May, 1940; col. 1504, Vol. 360.]
He applied that, in the first instance, to the members of his Government, and, next, to the Members of this House. We know, in the light of the last few days, how terribly it is being applied to those gallant men in the Forces: that wonderful Army, the British Expeditionary Force in France; the brave and dauntless airmen, who have incurred immense risks; and the splendid sailors of the Navy and the Mercantile Marine. We have all to ask ourselves to-day, "Are we, here at home, going to prove ourselves worthy of these men and of the sacrifices that they are making?" As I have said, it is no question of a nice balance between taxes and loans; it is a question of the maximum effort that we can make here at home, the maximum sacrifice that we can make in money, in order to sustain the efforts that those people are making with their lives and with their whole resources.
Hon. Members from these benches who have entered the Government have not hesitated to demand sacrifices from the workers in industry—not merely reasonable sacrifices, but unreasonable sacrifices—and the workers are going to make those sacrifices. Those of my party who are not in the Government will equally not hesitate to agree to heavy calls being made on the workers, and to sacrifices of time, energy, and money, to meet the cost of the war. But when we do that, we make two conditions. The first is that while those sacrifices are being made by the workers, persons with humble means, the Chancellor shall at the same time go for big money and those who have it. Let there be no mistake about this. I have never denied that the sacrifices demanded last September were as much as could have been reasonably demanded at that time. But we are not in September, 1939, to-day: we are in May, 1940, and it is not reasonable

burdens, but unreasonable burdens that have to be demanded from every section of the community at the present time. I admit that there are many men of great means who are devoting all their energy and all the money they can possibly put aside, by leading quite simple lives, to the advantage of the State. But many are not. Much luxury and much wanton extravagance still exist. That has to be stopped. I do not know how much money this will bring to the Exchequer, but I know that the Chancellor will not get willing sacrifices from the bulk of the people so long as wanton extravagance and luxury are permitted.
The second condition that we make is that no new burdens must be imposed on the poor. By "the poor," I mean those families that are already living below the Sir John Orr standard. To put burdens on that section of the population will not help to win the war, and we shall never stand for it. I say, quite frankly, that any new imposts which raise the price of necessaries will defeat their own object. They will do one, or both, of two things. If they really depress the standard of life of the poorer section of the people, they will lower the morale of the people and injure the prosecution of the war. In so far as they are successfully resisted by a rise in wages and in relief, they will not add to the resources of the country when the ultimate end is reached. Therefore, while we are quite prepared to support additional sacrifices being demanded from the workers of this country, we insist that those two conditions shall be fulfilled; that there shall be no extravagant spending allowed, and that, whatever burdens are imposed, they must not touch the standard of life of the poor, and shall not, therefore, be a burden on the necessities of life. That is the position so far as the tax revenue is concerned.
But the tax revenue is not the whole picture. As the right hon. Gentleman himself has said, there will necessarily be a suitable amount to be found from borrowing, from saving and lending. The nation expects a new outlook on this matter, too. I do not think that Lord Simon did too badly in the matter of borrowing as compared with the last war. In the last war the rates of interest were allowed to go up to 4 per cent., 5 per cent., 6 per cent., and, I think, even


higher than that. The rates of short-term lending also rose to very high figures. There was a great deal of pure inflation, which meant that the country paid twice, if not three, times over for the same thing. To be fair to the Government and to Lord Simon, he did establish something like a maximum for long-term lending at 3 per cent., for middle-term lending at 2 per cent., and for short-term lending at 1 per cent.; and that was a great improvement on what was done in the last war. But the present Chancellor of the Exchequer must not think that he can rest on those laurels of his predecessor. He has to make a further advance on that position. There is nothing sacrosanct about 3 per cent., 2 per cent. or 1 per cent. for those respective rates of borrowing. It is the business of the Chancellor of the Exchequer to see that sacrifices are made in those directions also. There is no earthly reason why he should not do it. I believe that those in high places in finance are expecting that he will take further steps in that direction.
Let me begin with the rate of long-term interest. There is nothing to prevent that coming down below 3 per cent. if the Chancellor of the Exchequer adopts vigorous action to bring it down. Even every ¼ per cent. by which it falls below that figure will make a great deal of difference to the position of the country after the war. Further, I really hope that the Chancellor will explore the possibilities of reversing the policy of his predecessor with regard to conversion of the loans of local authorities. I never got from Lord Simon any real reason for maintaining the embargo that was imposed. I have discussed this matter with a number of financial experts, and not one of them believes that there is any sound argument for retaining that embargo. Of course, I know the prima facie case. It is that the Treasury wants all the money it can get, and is afraid that there will be some leakage if a conversion is proposed. But I have never been able to see that that argument is sound, and I have never found anyone who justified it. Everyone that I have consulted tells me that he believes that that argument, if fully explored, will be found to fail entirely. In the first place, there is nothing to prevent the Treasury fixing the rate of interest at such a level that almost every, if not

every, holder of a local authority loan will necessarily convert. But even if a few do take a different course, and insist on being paid in ready money, that money, under present conditions, must find its way to public use. If a mere trickle fails to do so the advantage to the Exchequer of not having to find some of the interest itself will amply compensate for any such thing.
There is nothing sacrosanct about the 3 per cent. rate, and the Chancellor should get the public accustomed to thinking that that is a maximum, and not a minimum. I hope he will take steps in that direction. I need not discuss the 2 per cent. rate at length; but there is nothing sacrosanct about that, either. Finally, with regard to the 1 per cent. rate for the day to day money of Treasury bills, everybody knows that before the war the cost of money at the Treasury bill rate was just over 10s. per cent., and there really is not the smallest ground for increasing that rate. The new proposals put forward by the Lord Privy Seal have given the Government, as I understand, control of the banks. Of course, it does cost something to deal with this money; but it certainly does not cost £1 per cent.—I very much doubt whether it costs 10s. per cent. That is another matter which the Chancellor of the Exchequer must take into account. Neither the 3 per cent. rate, nor the 2 per cent. rate, nor the 1 per cent. rate is in any sense sacrosanct; and, with a new drive and new determination by the Government, I hope that those figures will come down.
We look to the new Chancellor of the Exchequer to take his courage in both hands. We do not want him to say to himself, "How can I get through my job without incurring more unpopularity than is necessary?" We want him to realise that it is his business to forge the financial weapons which will win the war. We want him not to be afraid to place burdens upon the people of this country, not reasonable burdens but unreasonable burdens which are in keeping with the unreasonable sacrifices we are demanding from our Forces abroad. We want him to place burdens upon us which are worthy of the determination and resolution of our country and of the brave acts of heroism and courage of those sons of Britain who on land, on the sea, and in the air are counting sacrifices as nothing if they can help to preserve the liberty


of the world and the noble traditions of the British race.

4.47 p.m.

Mr. Graham White: A week ago to-day there was passed through both Houses of Parliament, in something less than three hours, a Bill, in which the single operative Clause had about 100 words in it, and which gave the Government of the day complete powers for the conscription of persons, labour and property. It was a very remarkable Parliamentary feat. To-day we have to consider a Finance Bill of some 105 pages, with about 70 of the most complicated Clauses and Schedules that could possibly be devised. Two reflections came into my mind as I tried to read it, and tried still harder to understand it. The first was one of thankfulness that I was neither an accountant nor a solicitor and consequently would have little to do with the administration of this Bill, and the second was whether a Bill of that kind was called for and was really necessary in present circumstances. But on further reflection I came to the conclusion that the Clauses in this Bill, which give technical expression to taxes and duties which are already in operation, ought to be considered by Parliament, that it is the duty of democracy in Parliament to see that the machinery of these taxes and this Bill, which underpins the whole financial structure upon which we are resting at the present time and on which our war effort depends, works smoothly, and that democracy in time of trial should be jealous, as always, to see that whatever taxes are laid, are laid, without injustice and unfairness, on all sections of the community.
My right hon. Friend the Chancellor of the Exchequer, as he was reminded by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), has inherited a Budget which was justly and generally criticised as an inadequate expression of the determination of this country to secure victory. That was the first conclusion confirmed on second thoughts with regard to the Budget. If my right hon. Friend would look at the Bill which he has before him, I would like to draw his attention to a part of the Bill which he may not have read, because it is a part of the Bill which Members of the House do not as a rule trouble to read. I refer

to two lines in the Preamble, in which it says:
Your Majesty's most dutiful and loyal subjects…have freely and voluntarily resolved to give and grant unto Your Majesty…
That ancient and historic language in these days is of great and new significance, and I would say to my right hon. Friend, if he has any fears or doubts as to criticism, that those words are true in effect, and let him take them as the slogan under which he proceeds to action. If my right hon. Friend has criticism to fear, it will only be if he fails to carry out what is the accepted will of the people and the policy of this nation, with our great preponderance of economic strength in comparison with that of the enemy and is not sufficiently drastic in his proposal. We have it, and we should translate it as speedily as possible into materials of war and into forces which will make for victory. I heard with great satisfaction his statement that he anticipated that the expenditure of the nation would rise from the unsatisfactory figure which was forecast at the time when Lord Simon introduced his Budget. It is true that the Budget in these days is not a Budget in the ordinary acceptance of the term. It amounts to little more than a statistical review of the situation at the time. I stated at the time that the total expenditure on the war effort in this country was represented by an expenditure of £2,000,000,000, about two-thirds of the now generally accepted estimate of the expenditure of our enemy, and, assuming that we are the richest country of the three principal combatants at the present time, an inadequate expression of the measure of our financial effort in comparison with that of France.
Therefore, I heard to-day with great satisfaction that my right hon. Friend had foreseen that the new measures which were being taken in Supply and in the field of labour would call for a greater financial effort. He need be in no doubt at all that any efforts which are called for will be freely met by the people. I am glad to know that new action has been taken in some fields. Under the Emergency Powers Act I hope steps will be taken to stop the wholesale auction in regard to skilled labour all over the country. It has already led to a transfer of consumptive power running into hundreds of millions a year which would


if continued inevitably steer this country straight into inflation. That was a danger, which, I hope, has now been foreseen and will be dealt with, and that we shall escape from being plunged into the maelstrom of inflation.
Like my right hon. Friend the Member for East Edinburgh, I have no wish to say very much about the Clauses and details of the Bill, at all events at this stage, there is nothing to be said about the hardy annuals of tobacco, beer and spirits, except that they seem to be rather more hardy than usual. Clauses 7, 8 and 9 of the Bill will, I think, be welcomed by everybody, because, although they are perhaps small in relation to the total Budget, they grant recognition of services and concessions which will be useful to serving officers and local corporations in the carrying out of their duties at the present time. What gave me greater satisfaction than anything else in the statement of my right hon. Friend was the statement, about which there has been some anxiety, with regard to the incidence of Excess Profits Tax. It is to be 100 per cent., and it is to apply to all companies. That is a very wise step and, I think, will be welcomed. In fairly wide contacts which I have throughout the country I have not heard of a single expression of antagonism to the Excess Profits Tax in any form. The fact that it is 100 per cent. will make it much easier to carry out and to administer. It is a wonderful solace in adversity if we can all feel that we are in the same boat. There was some anxiety and heart-burning among many who are subject to the Excess Profits Tax because they felt that the incidence was not fair to them in relation to that of other people. I think particularly that was felt perhaps by the shipping industry, who have a special anxiety and responsibility to keep their fleets in being and make adequate provision for obsolescence during the course of the war. But these difficulties have been smoothed out by the decision to make the rate 100 per cent. all round.
I am by no means sure that, if we are to live up to what I believe is the intention and wish of the country that no one should be better off on account of this war, we ought not to consider the possibility of an excess income tax, so that

nobody should in fact have a better income during the war than he had before it. That is the logical conclusion to the present situation. I do not know whether there are people who still think that nations can go on squandering and destroying wealth at the rate at which it is being done to-day in Europe and at the same time can go on enjoying pre-war standard of amenities. If there are such people, the sooner they are free of any such illusions the better, but I have no doubt that my right hon. Friend, in considering what burdens he will have to place upon us in the near future, will bear in mind that particular suggestion. It requires perhaps more than the mere statement of it, but I think, on such reflection as I have given to it, it at all events corresponds to the principles of justice.
There is another matter of which my right hon. Friend spoke—the subject not of taxation but of what should be done to bridge the gap between that amount of £1,234,000,000 which he proposes to raise by taxation, and the growing volume of expenditure. There is one practical point and suggestion that I ask him most earnestly to bear in mind. He referred to the necessity of increasing voluntary savings. He and the House know that, with this expenditure on its present vast scale, it is very important that expenditure should be regulated to the point at which it becomes available in banks and people's accounts for applications for War Loans that he may be called upon to float. There is one thing at the present moment which is injurious from that point of view and also from another point of view, and that is the fact that the State at the present time is an uncommonly bad payer.

Mr. Stokes: Hear, hear.

Mr. White: I am glad to find that I have one supporter in the House. The State is in fact imposing a one-way moratorium, which, I think, is very unfair. The Ministry of Supply is an offender. Ship repairers and others at this time are under the necessity of conducting their businesses on overdrafts, which may be equivalent to the whole of their capital, and that means that they are not in a position to help and support any call for loans which my right hon. Friend may make to them, but it also means that, by creating conditions in that


way, they are aiding inflation and generally creating difficulties in the community. I ask my right hon. Friend to see whether he can persuade Departments to make payments more promptly than at the present time. If he can do this, he will do much to make financial transactions easier and his loans more successful, and he will do something to prevent that movement towards inflation which will have to be checked if it is not to make further progress and involve us in fresh difficulties.
I hope that careful consideration will be given to the question of borrowing. Lord Simon relied on voluntary savings to bridge the gap between taxation and the total expenditure of the country. There are people who say that we can no more rely upon that to fill the gap than we could rely upon voluntary effort to give us the Army of millions which is required for combat in the field of totalitarian war. I do not say they are right, but I do say that his predecessor based his assumptions, without any foundation which can be discovered, at all events by me, on the study of the figures of voluntary savings in recent years in this country. I support most strongly what my right hon. Friend says about the War Savings movement and the necessity that it should continue. It has now reached a figure of £180,000,000, and in recent weeks the total has been about £5,000,000 a week. But much more is necessary, and I hope he will keep this in view to see whether that optimistic assumption, which was not, I believe, founded on any substantial basis, is likely to be realised, and, if not, whether he will have to substitute for it some other plan. You have to remember that the movement in its early days did not consist solely of new savings. If the Chancellor consults managers of savings institutions and savings banks, he will find that deposits are being withdrawn and put into War Savings Certificates, Defence Bonds and the like. In the early days of the movement it was not dependent on new savings and was in fact a transfer of savings which had already been made. The savings movement will require great effort as time goes on, because of the fact that those savings will no longer be available, to find new money.
These are the only matters which I have felt moved to address to the House this evening. There is no doubt that my right hon. Friend will have the people of this country behind him. My right hon. Friend above the Gangway has referred to financial sacrifices which are hardly properly referred to in comparison with what is being done in other fields. We all know the gallantry of those who are defending this country at the present time. It makes me feel exceedingly humble. I have no doubt whatever that the people of this country will make any sacrifices which may be required to supply the men in the field. My right hon. Friend has no fear on that subject, but he has to be clear that in carrying out the policy of his Bill he is carrying out principles that no one shall be better off on account of the war and that the standards of the poor, already low enough, shall not be depressed still lower. In that connection I hope he will not neglect to consider whatever projects may be necessary in order to stabilise the standard of living of those who are at or below the standard laid down by Sir John Orr. It is a question of the number of people in families and one which, I think, can only be dealt with on the basis of justice if there is some form of family allowances. That is one condition. Another is that there shall be no waste, and still another that there shall be the conviction that with direct drive the financial and economic forces of this country shall be mobilised so speedily and effectively that we shall have a chance of winning the war.

5.7 p.m.

Mr. Hely-Hutchinson: In times like these I think that few words are best. I would like to say that I fully support every tax which is in this Bill and in the group of Bills connected with the Budget. Indeed, my only criticism of the taxes is that their scope is not large enough and that they are not sufficiently directed towards the restriction of spending by individuals, especially spending by those individuals who are in receipt of larger incomes as a result of our national war effort. The right hon. Gentleman himself foreshadowed the need for increased burdens, perhaps in the near future, but we all appreciate what the right hon. Gentleman opposite said, that the Chancellor is at present concerned with the business of bringing up the step-


children he has inherited from his predecessor. I am sure we all admit that even for so fertile a brain as that of my right hon. Friend, time is needed for gestation, and we must expect a reasonable interval to elapse before the arrival of new children en secondes noces. The hon. Member who spoke just now suggested the need for an Excess Profits Tax on increases in the incomes of individuals. In my suggestion, that it is necessary to restrict spending, I am putting forward the reverse of the coin of which he gave us the obverse.
The right hon. Gentleman opposite spoke of the desirability of reducing still further the rate of interest on Government borrowing. I think all of us would like to see that accomplished. Some of us, however, are not absolutely convinced that the powers of money management are unlimited. Certainly to the extent that it is possible to bring these powers into operation it requires the stopping of leaks, and one leak which requires to be stopped is the free opportunity for the spending of money which might otherwise be lent. I hope my right hon. Friend will bring particular attention to bear on this point. Also, if he is to accomplish further reduction of the rate of interest at which the Government borrow, he must also reduce the rate of interest at which they are now borrowing on National Savings Certificates and Defence Bonds, and the rates of interest which are available to investors on all other classes of investments. The problem is not one which can be dismissed hopefully with a wave of the hand. I speak with little knowledge of financial theory, as my own knowledge of the subject of finance is limited to practical experience, but I do feel my right hon. Friend has in front of him a formidable task if he is to accomplish further reductions of rates of Government borrowing and, at the same time, succeed in borrowing the money.
There is one feature of the Bill to which I would like to draw attention and to which I did, in fact, draw attention the other day when speaking on the Limitation of Dividends Bill. It is that in imposing these high rates of taxes—the 7s. 6d. in the £ Income Tax and the Excess Profits Tax of 100 per cent., both of which I welcome as being appropriate to the times—these high rates of taxes, coupled with dividend restriction, may

lead to a defeat of the Government's own object if they still leave individuals with the incentive and power, and in the case of company directors the duty as well, to do the best they can for themselves or for those whom they represent. The effect of these high rates of taxes is to increase very greatly the incentive of company directors to spend unless they have terms of reference that tell them that their duties are no longer towards the shareholders whom they represent. It would be possible to multiply examples. Perhaps I may give one or two short instances.
In the jute business at present some of the companies which manufacture are in England and Scotland and some are in Calcutta. In Calcutta some are under English registry and some are under Indian registry. For a number of years they have been doing badly, but recently, as a result of the war, they have had an enormous volume of profitable business. Practically all the companies in England and Scotland, and all the Calcutta companies which are under English registry, automatically come, as the result of this increased prosperity, into the class which will pay 100 per cent. on excess profits above a certain figure. That means to say that any item which they can properly charge to expenditure is really paid for in full by the Government. That is something which the Government will have to face. Furthermore, in looking at the position of these companies it is often difficult to decide whether a given item ought to be charged against capital, and in determining any argument between a company and the Government, as to how that charge should properly lie, a company will, naturally, employ the best expert advice it can get. The cost of that advice will fall 100 per cent. on the Government.
I mention these problems in the sense of desiring to help the Government to achieve their object. Again, what incentive has such a company to take on more business? None at all. At the present time cement companies which previously had been packing cement in paper containers have, owing to the restrictions on the supply of paper, been asking the jute manufacturers to figure on jute containers for cement. Companies which fall into the category of paying 100 per cent. Excess Profits Tax do not mind whether they get that business or not, and they will put the figure very high. They do not mind whether they get that business


or not, and so the business will tend to go to concerns under Indian registry where the taxation will not fall under this Bill and accrue to the Government.
Then again—and this applies to all businesses in the export trade who fall into the category of 100 per cent. Excess Profits Tax—there is no incentive to them to do what is in the national interest and charge the maximum possible price which the foreigner can pay. There is an incentive to them to do business at cost without any profit at all and get some collateral advantage now or in the future which will possibly come to them in a non-taxable form. I am not saying that this will be the practice or the policy of business. Far from it. I am absolutely sure that the vast mass of industry will gladly accept as terms of reference that their duty is to conserve their assets and produce during war time for use rather than for profit. But I want to drive home to my right hon. Friend the enormous number of loopholes he will have to stop when he introduces taxation at these rates. May I say that there is a strong desire on the part of all responsible business men for clearer terms of reference as to where their obligation lies. Those of us who have had experience of the administration of property know that there is no such thing as wealth without intelligent direction. Now we are concerned with the question to what end shall management of property be directed. There can only be one answer in total war, and war only knows the present tense. The answer is that property must be administered to the single end of the preservation of life and the winning of the war. That must be the immediate object of every one who is charged with the duty of administering property and managing it at the present time. With a full sense of responsibility and from an experience arising directly out of the duty of having to administer property, I say to the Chancellor of the Exchequer that wealth, capital, property, call it what you will, is now asking for direction, is asking to be put under martial law in order that it may make its contribution towards the winning of the War.

5.19 p.m.

Colonel Sir George Court hope: There is one matter to which I want to draw the attention of the Chancellor of

the Exchequer. By some curious and unforeseen set of circumstances the Bill, as it is drawn, and the interpretation it puts upon the Excess Profits Tax, is creating an obstacle to one particular line of our war effort, an obstacle which I think every one would desire to be removed. I refer to the rapid acquisition for national purposes of home-grown timber. The timber position is far from satisfactory. It is the duty of the Forestry Commission, for whom I speak in this House, to acquire and convert into useful forms home-grown timber as rapidly as possible. By a strange combination of circumstances we find that in a great many cases standing timber, the owners of which are perfectly willing to sell for war purposes and which we want to acquire, because it is capital for the purposes of one tax and income for the purposes of another, will be liable, if we buy it, to taxation exceeding the gross price. That, obviously, is not a commercial transaction into which even the most patriotic woodland owner would willingly go. Although we have full compulsory powers of acquisition, those who have to exercise these powers on behalf of the Crown hesitate compulsorily to acquire property on behalf of the Crown on which another agent of the Crown will extract not only the whole but rather more than the whole of the purchase price. It is a position which was unforeseen, and I am sure is unintentional.
At the instance of the Chancellor of the Exchequer's predecessor, Lord Simon, I have been in touch with the Board of Inland Revenue and have also consulted representatives of woodland owners in England and Scotland, and I am perfectly certain it will be possible to remove this obstacle by a simple Clause in the Finance Bill, but, as long as this obstacle remains, it is a serious deterrent to the rapid acquisition of home-grown timber for war purposes, which from every point of view is desirable. I, therefore, ask the right hon. Gentleman to pay particular attention to it, not in order to redress a grievance or lighten a burden but to remove an obstacle to one aspect of our war effort which we all desire to see removed.

5.23 p.m.

Mr. Benson: I have a good deal of sympathy with the remarks of the hon. Member for Hastings (Mr. Hely-Hutchinson) on the subject of the


100 per cent. Excess Profits Tax. We know that the old Excess Profits Duty in the last war prompted the utmost extravagance. The duty of the Chancellor of the Exchequer is not in any way confined to clapping on an Excess Profits Tax of 100 per cent.; he will have to find some method of dealing with the difficulties raised by the hon. Member for Hastings. The capitalist system—I suppose we may mention it in the present circumstances—has as its main motive the making of profit, and if you are going to lop off profit sharp and clear at a pre-ordained level you are striking a fatal blow at what has been claimed to be the most effective motive for industry. Therefore, I want to emphasise the difficulties raised by the hon. Member for Hastings in connection with this 100 per cent. Excess Profits Tax. I do not think the Bill has had a very welcome reception. Everybody regards it as an entirely inadequate makeshift which will very soon have to be supplemented. I do not therefore propose to discuss the Bill itself.
There are two points I want to raise which can be dealt with immediately by the Chancellor of the Exchequer and are of considerable importance; The first point has been touched upon by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence)—the question of the Treasury bill rate. Before the war the Treasury bill rate was a shade over ½ per cent.; at the present time it is over 1 per cent. In the first six months of the war that rise in the rate, quite apart from any increase in the number of Treasury bills discounted, has cost more than £3,000,000, that is £6,000,000 in a full year, and if we do not—as is highly probable—bridge the gap between taxation and expenditure by real borrowing, we shall have to borrow more and more heavily from Treasury bills, so that the £6,000,000 may swell to a considerable figure. The rate is a great deal too high; there is no question about that. Local authorities when they discount bills are getting a better rate than the Treasury. Only six weeks ago the municipality of Bristol discounted bills for £500,000, six months bills, and obtained a better rate than the Treasury obtained for their three months Bills. A month ago Greenock discounted £100,000 at a rate of just over 1 per cent. and are able to borrow on as good terms as the Treasury. This matter has been

raised from time to time, but quite frankly the ex-Chancellor of the Ex-chequer never gave us any information. His replies have been equivocal and disingenuous. When asked why the rate was over 1 per cent. his reply has been that there are a large number of factors which have to be taken into account. That may be true in theory but it is absolutely untrue in fact.
One factor alone controls the rate of discount of Treasury bills, and that is the day-to-day rate on which banks are prepared to lend money to the discount market and the rate at which they are prepared to rediscount bills. That is the only factor which governs the situation. At the present moment they are demanding 1 per cent. The discount market is entirely dependent on the banks, and they themselves discount bills at a differential rate of 1/32nd. Really the prime factor in the whole situation is the day-to-day rate and the rediscount rate. It does not depend on a large number of various factors. The rediscount rate of the banks is arranged with the Treasury, every school boy knows that. The hon. Member for Hastings suggested that if we force down the rate of interest too low, we may have difficulty in attracting cash. There is here no question of attracting cash. The money that goes into the discount market for the provision of Treasury Bills is purely artificial. It can be produced ad lib. It depends upon one thing only, and that is the liquidity of the banks at any given time. The banks can lend to the discount market and the discount market can discount Treasury bills up to any extent, depending on the liquidity of the banks; but that liquidity is not a fortuitous thing, for it depends upon the open market operations of the Treasury, which can put the banks in funds at any time it wants by open market operations. The source of Treasury bill money is absolutely controlled by the Treasury.
Another point which I want to emphasise is that the cash which flows into Treasury bills is not bank cash. It is not even the banks' credit that is being used. It is the national credit. The banks are merely a cog in the machinery by which that national credit is utilised. I see no ground whatever for the Treasury doubling the rate paid for this credit. It is not so much an interest rate as a remuneration for functions performed. I


think the House is entitled to have a clear reply on this matter from the Chancellor of the Exchequer. The question has been asked a number of times and invariably an evasive reply has been given. Before the war, the banks were satisfied with one-half per cent. Why have the Treasury given them an additional subsidy of another half per cent.? There are no obscure economic facts involved. The reason the one-half per cent. has been increased to 1 per cent. is that the Treasury have agreed with the banks to pay that amount. There may be some reason why the Treasury have made that agreement—I do not know—but if there is, it has never been stated to the House, and I say that the House is entitled to know the reason. I hope we shall be given a clear and unequivocal reply to-night.
Another matter to which I want to refer is the free sterling market. This is a matter which shows very clearly what I consider—and I am not an anti-bank crank—to be the undue influence which the banks and the City of London have been exercising on the Treasury. When this matter has been raised on several occasions in the House, we have received similar equivocal and disingenuous replies from the former Chancellor of the Exchequer. We have been told that the free sterling market is not a very important matter and that it is a very small market. It is true that it is a small market and that the amount of free sterling dealt in is not very great, but that does not mean that the free sterling market rate is unimportant. As a matter of fact, small though the free sterling market may be, the free sterling rate controls the sterling exchange rates in every currency except 10. With the exception of those 10 currencies, all the sterling exchanges in the world fluctuate with the free sterling rate.
Let me give the House some examples. Three months ago the free sterling rate was 3·95, and last week it dropped to 3·25. Three months ago, the lira was 77 and on Monday last—before the Belgian disaster—the lira was 63. Three months ago the dinar was 165, and now it is 130; the escudo was 108, and now it is 90, and the yen has appreciated from 1s. 2d. to 1s. 5d. Those currencies have fluctuated not because of any adverse

balance of trade, but simply because they are pinned to the free sterling rate. It is a very serious matter when there is a steady depreciation in our currency, as during the last three months. We have set up an Export Council and we have been told, rightly, that the exports of this country are of vital importance. We export not for the fun of doing so, but primarily for the purpose of conserving our sterling reserves, and if those reserves are steadily reduced by depreciation in the exchange, we nullify the export drive and the result is that the President of the Board of Trade, very much like the White Queen in Alice in Wonderland, has to run desperately hard to stand still.

Mr. Deputy-Speaker (Sir Dennis Herbert): I do not wish to interrupt the hon. Member unnecessarily. All that he is saying is very interesting, but I hope his remarks will not be followed by other hon. Members, because I find it rather difficult to permit these arguments about currencies and exchange on the Second Reading of this Bill.

Mr. Benson: With very great deference to you, Mr. Deputy-Speaker, I suggest that anything which affects the finances of this country is relevant.

Mr. Deputy-Speaker: I am afraid the hon. Member is wrong. That is not so.

Mr. Benson: I fear that, like many hon. Members, I am not quite au fait with the Rules of Order of the House. In the past, we have had very wide discussions on the Second Reading of the Finance Bill. As I said at the beginning of my remarks, I do not want to discuss the Finance Bill itself, but perhaps I have gone farther than is permissible under the Rules of Order. Therefore, I will conclude by asking the Chancellor of the Exchequer to consider the two points to which I have referred. I do not know whether under your Ruling, Mr. Deputy-Speaker, he will be able to reply to them to-night, but if he may do so, I hope we shall be given more straightforward and definite information on these points than we have managed to obtain hitherto.

5.38 p.m.

Mr. Stokes: The Chancellor of the Exchequer, in his speech this afternoon, referred to his intention to put a tax on the rents of empty houses. That may be all very well in the first instance


as a way of collecting a little more revenue, and the tax may for a time be paid by the landlords, but surely, unless the Chancellor tackles the basic issue of economic rent, the ultimate result will be that the landlord will merely pass the tax on to the house renter and the house renter, who may be in even more difficult circumstances than at present, will be required to pay the tax. The Chancellor spoke about the Excess Profits Tax having gone up to 100 per cent. I am still not clear as to what companies this refers to. While the Chancellor was speaking, I made an interjection, and he replied that it referred to all those companies that were referred to in the previous Act. I have looked at the previous Act, and still I am not clear. Therefore, I ask the Financial Secretary to the Treasury to give me an answer to this specific question—Would the profits of a firm like the Bank of England be subject to an Excess Profits Tax of 100 per cent.?
The Chancellor referred also to the gathering momentum of the National Savings Scheme. He told us that at the present time the weekly savings amount to £5,000,000. Taken alone, that is a monumental figure, but I cannot help remarking that to me it seems to be much more of a gathering lag, because we are spending at the rate of £42,000,000 a week and are collecting from the small savers only one-eighth of that amount. I do not wish to detract from the National Savings Scheme under the present system, and I see that it is necessary, but I cannot help thinking that it is a great swindle, if I may so call it, to allow the big money lenders to get away with the swag behind a sort of veneer of small holders who will kick up a tremendous fuss when the war is over when one tries to deal with these loans, if they are going to be raised, as I suspect, in accordance with established custom.
This Bill is a miserable, pettifogging affair in that it does not get to the root of the main troubles. Before suggesting the remedies which I should like to see applied, I wish to put to the Chancellor one or two questions to which—like my hon. Friend the Member for Chesterfield (Mr. Benson)—I have never succeeded in getting an answer from the late Chancellor of the Exchequer. We all know the extent to which the Government's day-to-day needs are financed by Treasury bills. On this matter I have put questions

to the late Chancellor, and never received a satisfactory answer. I hope that on this occasion the Financial Secretary will give a satisfactory answer, although he has never done so before. During the first 11 weeks of 1939, when the Bank rate was 2 per cent., it was possible for the discount market to take bills at 11s. per cent.; why is it necessary to-day to pay over £1 per cent.?
I have pointed out to the late Chancellor that a syndicate exists and that it ought to be looked into. He would not admit that there is a syndicate, but again I call the attention of the House to the fact that there is a syndicate of some 16 members. Some of the names are well known—for example, Brocklebank & Company; Roger Cunliffe, Sons & Company; Gillett Brothers Discount Company; National Discount Company; Seccombe, Marshall and Campion; the Union Discount Company; and Jessel, Toynbee & Company. It was stated in the "Observer" last Sunday that they get together and arrange what the rate of discount is to be. I am a little puzzled by this statement, and I hope that the Financial Secretary will give some explanation of it. Apparently, last week, the syndicate maintained its bid at £99 14s. 10d. per cent. and received only 45 per cent. Does that mean 45 per cent. of the bills allotted, or 45 per cent. of their claim? If it means 45 per cent. of the bills allotted, it seems to me that somebody else got away with something of the order of £1 15s. per cent., which seems to me to be wrong. Apparently, the Government control the banks under the Emergency Powers, and it ought to be possible for them to finance short-term money direct with the banks, without letting in outsiders, and thereby, as far as I can calculate, save a sum of £6,000,000 a year.
We all know that this matter is very much affected by the Bank Rate, and on this I want to put a direct question to the Financial Secretary. Time and again we have tried to discover who controls this important concern, the Bank of England, and we have not been able to do so. It is supposed to be the national bank. It is not anything of the kind. It is a private concern into which one may not delve. Normally, in peace-time, the Governor of the Bank settles the Bank Rate week by week, but we have it on the


authority of the Governor of the Bank of England himself that in war-time he no longer settles the Bank Rate, and that the Treasury does so. If that be the case, why is it necessary to maintain that rate at 2 per cent.? Why cannot it be brought down to 1 per cent., thereby making it cheaper for the Government to finance the war, and also bringing an immense amount of relief to industrial concerns working on overdraft? Here let me interrupt my main theme to say that I endorse what has already been said with regard to the Government being a bad payer. It is shocking that a sum of something like £100,000,000 should be owing by the Government to industry at the present time. It means, in effect, either that the Government are getting the goods cheaper than they ought to get them or that by this, in itself, they are causing a form of inflation.
With regard to the decision that the Government shall control the banks with the idea of being able to run their finance more cheaply, may I point out that control of the banks is futile unless the Government take over control of money creation and issue? I hope there will be a statement soon to the effect that the Government have taken that decision and that they will use all the monetary powers that have been given to them, in order to finance the war on the cheapest possible scale. The Emergency Powers Act requires everybody to place himself, "his services and his property at the disposal of His Majesty," but it does not require that the national credit shall be placed at His Majesty's disposal. If the Government think they will get away with this war by loading another great burden round the necks of the people, on which moneylenders will be paid interest, then they are greatly mistaken. If they do so, they will incur the great displeasure of the people, who will turn and rend them, when they realise what an appalling swindle it all is.
I propose to spend a few minutes in discussing the methods of financing this war in relation to the methods which were employed in financing the last war. I think that that will be germane to this Debate. The last war left us a legacy of £7,000,000,000 debt—a perfectly appalling burden. I wish to dispel what I believe is an illusion as to what this debt

really is. In point of fact, it was paid for at the time when it was incurred by the sweat and blood of the people who fought the war and used their effort in making munitions and in other ways. In spite of that, we have this paper entry representing £7,000,000,000 which has been paid for more than once already in the interest rates. I deplore the fact that there is no provision in this Bill for the liquidation of that debt. The Chancellor might have incorporated in the Bill some such arrangement as this—that the Government should say to the holders of those loans "You have been paid more than you ought to have been paid, morally at any rate. We do not intend to tear up these loans but you must regard 50 per cent. of the interest paid henceforth as a capital repayment and after a fixed term of years, there shall be no more National Debt."

Mr. Deputy-Speaker: I am afraid that the hon. Member is now, certainly, going beyond the terms of the Finance Bill, which, as he must know, is confined to the finances of the year. When he started his reference, he said he thought it was germane to the subject under discussion. I thought at the time that he might possibly be right but I fear that all his remarks since he used the word "germane" have been irrelevant.

Mr. Stokes: I must apologise for straying outside the bounds of Order as defined by your Ruling, Mr. Deputy-Speaker, but I presume that if I proceed to deal with the methods of financing this war, I shall be within the terms of the Bill.

Mr. Deputy-Speaker: It depends on how the hon. Member does it.

Mr. Stokes: I shall endeavour not to stray, and I shall have to abandon my effort if it turns out to be too difficult. The point which I wish to put to the House is this: Surely it ought to be possible this time, starting now with this Bill, to provide that we shall not have this appalling debt payment hanging round our necks for evermore. If the war goes on until 1943, the peak of interest payments will be about 1947 and unless some provision is made now, at the very beginning, in organising these loans, I calculate, that the annual debt payment in interest alone in 1947, will be £672,000,000. I suggest that if the Government are to take over the banks, as


apparently they are, they ought to be able to finance the war without any interest payments at all.

Mr. Deputy-Speaker: I am afraid the hon. Member is not being very successful in his effort to keep within the terms of the Bill. I must remind him that this is not a Loans Bill and does not deal with loans, except in so far as it makes provision for raising the money necessary during this year for the service of existing loans.

Mr. Magnay: On a point of Order. Cannot an hon. Member give examples of what was done or left undone during the previous war, as illustrations of what we ought to do or leave undone now?

Mr. Deputy-Speaker: There is no proposal in this Bill of the kind with which the hon. Member for Ipswich (Mr. Stokes) was dealing.

Mr. Stokes: In view of your Ruling, Mr. Deputy-Speaker, I must abandon what I considered to be my main theme and still more my main duty, namely, to stress the importance of preventing these burdens being imposed on the people.

Mr. Charles Brown: On a point of Order. I thought it was only in a Third Reading Debate, that hon. Members were confined to the discussion of what was actually in a Bill.

Mr. Deputy-Speaker: Yes, that is so, but hon. Members in this discussion, which is a Debate on the Second Reading of a Bill, are confined to what is relevant to the Bill.

Mr. Rhys Davies: May I point out that Clause 59 of the Bill refers to "provision as to permanent charge for National Debt." May I respectfully suggest that the hon. Member for Ipswich (Mr. Stokes) was dealing with that subject?

Mr. Deputy-Speaker: I do not think that is so. The hon. Gentleman himself knows that the permanent charge for the National Debt is one which is made every year, for the purposes of the finances of the year, and his point supports what I said just now.

Mr. Stokes: I must conclude with this remark. I hope that between now and the time when this Bill comes before the

House again, the Chancellor of the Exchequer will make provision whereby the two main burdens on the people, namely, the £500,000,000 which is paid in rent each year to the landlords and the £246,000,000 which is paid each year to the moneylenders will be done away with and not allowed on any account to recur or increase when this war is over.

5.52 p.m.

Captain Vyvyan Adams: I wonder whether the Comptroller of His Majesty's Household, who is now on the Front Bench, will be good enough to find and fetch the Chief Government Whip, as I propose to attack him in a few moments.

Mr. Magnay: Is that germane?

Captain Adams: It is certainly very germane, as the House will see. If that request does not produce any result, I shall proceed in a few minutes to do what I have just indicated, but it would be fairer to the Chief Whip that he should be acquainted with my intention. Since I was last here, nearly two months ago, the scene has considerably changed. A great many say that outside it has become darker, but I hope I may be allowed to say that within this House, in one respect, I find the scene far brighter. Indeed, the view of the Government Front Bench at Question Time from this place where I sit, is considerably more refreshing to me than it used to be. Perhaps, in connection with this Bill, I may say that we now have a Government which is very nearly after my own heart. Indeed, I believe that if we had had this Government two years ago, there would have been no war and no need for a Finance Bill of the astronomical dimensions of that which we are considering to-night. One or two anachronisms persist in this really National Government, and of them I hope shortly to say a little more, but before I come to the stewards of the national purse, perhaps I may be allowed to deal with their stewardship.

Mr. Deputy-Speaker: I am wondering when the hon. and gallant Member is coming to this Bill.

Captain Adams: It will be immediately apparent to you, Mr. Deputy-Speaker, how I am connecting my remarks with the Bill.

Mr. Deputy-Speaker: I am afraid that, so far, the hon. and gallant Member's remarks do not seem to me to be connected with the Bill, and the matter is one for me to decide.

Captain Adams: I do not wish to bring myself into conflict with you, Mr. Deputy-Speaker, and I am sure you will agree that it is germane to this discussion to say that this Finance Bill is a temporary and stop-gap Measure. Would you give me your Ruling on whether that remark is relevant or not?

Mr. Deputy-Speaker: I shall interrupt the hon. and gallant Member when I consider that his remarks are irrelevant.

Captain Adams: I am much obliged. Perhaps I may be allowed to say that this Bill is as inadequate as its author who has now, at long last, been removed to the Woolsack. I hope that the new Chancellor of the Exchequer understood all that he was reading to us when he moved the Second Reading of this Bill. Far greater efforts in the financial sphere will be necessary to provide the machines to defeat the enemy. I believe that the Government understand that, and will take measures to correct the defects of this Bill later in the financial year. The more quickly we can turn out masses of warlike material, the sooner we shall be able to crush the enemy.
That is a truism, but it is none the less true. Any kind of withholding of weapons is, to-day, a false economy. I repeat what has been said already that I hope the Government will not shrink from using the immense new powers which they have acquired in the last few days, to oblige those who can afford it, to pay. Perhaps, simultaneously—here again I re-emphasise what has been said already—they could modify the rates of postage and the taxation on tobacco for all those who are serving in the ranks. I suggest that this concession might be regarded as a legitimate munition of war because those two matters are very deeply felt by men serving in the ranks. Their chances of corresponding with their relatives are considerably limited by the high postage rates. One of the main recreations of our Forces, smoking, is seriously curtailed, perhaps more than is imagined by hon. Members, unless they have close contact with the Forces, through the fact that cigarettes and

tobacco have been raised so considerably in price.
Where there is a question of weapons or defensive measures, the words "economy" and "extravagance" are irrelevant. Perhaps I may be allowed to offer an example. It may seem an insignificant example but I think the House will recognise its importance. Everyone has heard recently of the astonishing exploit of a company of Pioneers in France, members of the Corps with which I have the honour of serving at the present moment. This company succeeded in disabling, by means of their picks, two German tanks and then took the crews prisoner. I submit to the Financial Secretary, and I ask him to pass the suggestion on to the War Office, that it is false economy to arm only a proportion of the Pioneers as is done at the moment. If these men are good enough to fight with picks and shovels, with the remarkable result which was described the other day, they are all good enough to handle rifles. I would ask the right hon. and gallant Gentleman to pay attention to this matter, because this is a very serious point and one which is keenly felt in the Pioneer Corps. Many of these Pioneers are old soldiers, and now that open warfare has returned, I suggest that they should be as fully equipped as the infantry. Another instance in which economy would be completely false is the evacuation of the civil population from target areas. It is false economy to stop short of anything less than compulsory evacuation.

Mr. Deputy-Speaker: The hon. and gallant Member must realise that this is not a matter which is dealt with in the Finance Bill.

Captain Adams: May I respectfully submit—and I am not in the least trying to be facetious—that reference to the whole range of national expenditure is relevant on the Second Reading of the Finance Bill?

Mr. Deputy-Speaker: That seems to be a mistake which other hon. Members have made. It is not so. The Debate on the Second Reading of the Finance Bill must be relevant to the Bill, in the same way as the Debate on the Second Reading of any other Bill.

Captain Adams: I do not wish to argue with you, Sir, in any way, but I wish to


make this submission. The Bill deals with the provision of money for national expenditure, and therefore, surely, the various items which will involve a large amount of expenditure must be relevant in this discussion.

Mr. Deputy-Speaker: There must be some limit to that, otherwise there would be no limit whatsoever on what could be discussed. It would mean that anything connected with the war could be discussed.

Captain Adams: Will you then, Sir, give me a ruling on whether I can carry out my original intention and pass strictures on the Parliamentary Secretary to the Treasury?

Mr. Deputy-Speaker: I should very much doubt it, but I can only say, as I have said before, that I shall stop the hon. and gallant Member when I think he is irrelevant.

Captain Adams: I wish to say that I regard the Parliamentary Secretary to the Treasury, in view of what has happened over the last nine years, during which he has had most remarkable power, as one of the most expensive political luxuries ever inflicted upon this nation. It is a good thing that a number of new men have been invited to find money for this Finance Bill, and I wish them, in all sincerity, Godspeed.

Mr. Deputy-Speaker: Quite obviously, the hon. and gallant Member is on a line which he cannot possibly pursue. Apparently, what he wishes to deal with is a matter which, presumably, can be dealt with on the Estimates of the right hon. and gallant Gentleman's salary.

Captain Adams: I understand that, but I should like to say that, at considerable inconvenience, I have used the privilege every serving Member of Parliament possesses to come a long distance in order to make these remarks this afternoon. I thought also, on the Second Reading of the Finance Bill, I should be fully within my rights to say them, but you have ruled otherwise. That being so, I cannot continue. Perhaps you will allow me to say that I wish this really new National Government the very best good fortune in the immensely important financial task before them. There are one or two points where I think it represents imperfection—

Mr. Deputy-Speaker: I am sorry that the hon. and gallant Member should have put himself to so much inconvenience, but, really, by this time he ought to be better acquainted with the Rules of this House than to have thought it possible to discuss the formation of the Government on the Second Reading of the Finance Bill.

Captain Adams: One of the first major speeches I heard on the Second Reading of the Finance Bill of 1932 was made by the present Prime Minister. At some length he discussed the personality, career, and policy of the predecessor of the then Chancellor of the Exchequer—Lord Snowden.

Mr. Deputy-Speaker: That seems to be irrelevant to the argument.

6.5 p.m.

Mr. Lewis: Financially speaking, we live in very strange times. When the present Chancellor of the Exchequer's predecessor brought in the Budget on which this Bill is founded the principal criticism laid upon him was that he was not arranging for the country to spend enough money, and that was at a time when taxation was enormous, and when, despite that enormous taxation, we were obliged to resort to borrowing on a very large scale to pay our way from day to day. To-day, more than one Member has referred to the present burden of taxation in terms which I think I may, without exaggeration, summarise as meaning that the higher the taxation placed on the taxpayers, under present conditions, the better they will be pleased. It seems to me that these arguments are rather dangerous to address to a Chancellor of the Exchequer. Even during total warfare he still remains the guardian of the national finance, and we can rely upon the heads of the great spending Departments to support vigorously the claims of those Departments for money. So far as the Chancellor of the Exchequer is concerned, he is the only one of the great officers of State charged with the duty of seeing that our finances are wisely managed and that money is not wasted. I hope very much that the new Chancellor will not take a reckless view of his duties as a result of the Debates on the Budget this year, and the Debate, to-day, on the Second Reading of this Bill.
This afternoon the Chancellor of the Exchequer hinted that he may shortly be


coming before us with demands for fresh taxation. I hope that when that time arises he will bear very closely in mind that there is one grave danger threatening us, and one which particularly concerns his Department—that is, the risk of inflation. There is an immense amount of purchasing power going into the hands of those classes who do not pay Income Tax. For the most part it is going into other hands, and if the Chancellor of the Exchequer cannot find a means of preventing that enormous increase in purchasing power getting into the market, he will be unable to prevent inflation. I realise that the problem is one of great complexity. No one would desire that steps should be taken, through taxation, to reduce the standard of living of the bulk of the community, and above all of those whose incomes are the lowest; nevertheless, I feel that it is essential, when the Chancellor of the Exchequer considers this further taxation that he has in mind, that he should pay heed to this increased purchasing power, to-day, passing into the hands of large classes of wage-earners in this country. Not only do I think he should regard it from the point of view of taxation, but also there is the question of lending to the Government. I have never been one of those who admire the proposals put forward by Mr. Keynes for compulsory saving, but, at the same time, I recognise that something of that kind may become necessary if voluntary lending does not prove sufficient. It might be well worth the Chancellor of the Exchequer's while to consider whether there may not be other forms of security which he could offer to the small lender which might attract savings not at present taxed. I hope he will not take too narrow a view of his duty in that respect, and that he will not be too hide-bound by precedent.
Suggestions have been made in this House on more than one occasion of some system whereby, at a purely nominal rate of interest, securities could be issued where there was the possibility of an increase in capital value in a short time. I have always felt that there was much to be said for that. There are great numbers of people in this country who will always endeavour to set aside a proportion of their incomes for purely speculative purposes, such as, for example, betting. I do not think that the present

suggestions with regard to borrowing for Government purposes can hope to tap that source of revenue. I cannot help thinking that, within the limit of sound finance, it should be possible for the Chancellor to devise a form of security which would tap that source if such a form had the effect whereby the purchaser of a security could purchase the possibility of an increase in capital value—something in the nature of what has been described as premium bonds, although I do not wish to go too far on this subject, because I am not certain how far it would be germane to the Bill.
I would like to conclude by urging on the Chancellor, when the time comes to do what he foreshadowed this afternoon in placing further burdens on the community by way of taxation and in raising fresh loans, that he will try to view the matter with a fresh mind, bearing in mind, as far as taxation is concerned, the immense importance of preventing the increase of purchasing power of the community causing inflation. I would also urge that with regard to borrowing he should try to see whether he cannot tap this extra source to which I have referred.

6.11 p.m.

Mr. Woodburn: Many Members have expressed the point of view to-day that the Budget now before us is unfortunately not too much, but too small. This Budget is the financial measure of the amount of effort we shall be able to make within the next year. I think that, in view of the situation through which we are passing on the Continent, we are bound to realise that, perhaps for the first time in our history, it would be a great pleasure if this Budget could be twice its size, in order to finish the war, this year, by having ample machinery and means of warfare available for our men. The proposals before us for raising this money include many novel ideas, and I am quite sure the burden will be met by the people without flinching. I would like to refer to one or two matters of detail, and particularly to the proposal which came from my hon. Friend below the Gangway. It was suggested that we should institute some means whereby there should be no increase in incomes compared with pre-war days. That, of course, would be quite impracticable, and


it would destroy the whole war effort of the country.
I would suggest a slightly different principle, that is to say, that there should be no increase in incomes or benefit unless there is some increase in service. Men are increasing their incomes to-day, because they are giving more service or different service compared with pre-war days, and if we said to them that their incomes were not to be increased it would bring much of the essential war effort to a dead stop. You cannot say to a man who was working 48 hours before the war started, and who is now working 90 hours a week, that he is to be paid the same wage as a labourer. However much we may regret it, if we are to secure the maximum productivity this country will yield, we must provide some inducement by way of increased remuneration to the men which we are asking for increased services. I suggest that that is a principle which should be applied also to the banks. The banks provide a useful service, and the question of 1 per cent., 2 per cent. or 3 per cent. is merely the way in which the banks are paid for their services. The banks are entitled to be paid if they give extra service, but they are not entitled to a huge amount of extra profit if their service is not increased and it is simply a case of a few extra book-keeping entries. I suggest to the Chancellor that instead of roaming round this question of percentages to the banks, the Government should deal with the rest of the Bank of England and the banking institutions as they have dealt with the Issue Department and make the profits come back to this Government. Then it would not matter what percentage they paid to the banks, for they would simply pay out of their own pocket what would return to them.
The Chancellor raised the question of the 100 per cent. Excess Profits Tax. I welcome his announcement that it will apply to all companies, because consternation was caused among companies which are working on war production when they understood it was not to apply to other companies. That was not because of selfishness, but because companies on war production realised that if other companies were entitled to make abnormal profits with no restriction, their workmen would be bribed from them and all kinds of material would be bribed from them,

so that, instead of the war effort being helped, it would be hindered, if not brought to a stop in some directions. Therefore, on the ground of fairness and efficiency, I welcome the idea that the 100 per cent. Excess Profits Tax is to apply to all companies. One difficulty will arise in applying the tax to co-operative societies. One of the purposes of the Budget is to retain purchasing power in the hands of the Government and to leave as little purchasing power as possible in the hands of the general public. In other words, we want to restrict private spending. Co-operative societies are savings banks. Their dividend is not profit in the normal sense, but extra payment that a person makes for his goods; this accumulates and is paid out to him like a bonus each half-year. It is open to members of a co-operative society either to buy their goods at cost price and not have the dividend, or to pay a higher price and accumulate the dividends. If co-operative societies put part of that surplus to reserve, it is charged with Income Tax, and it is now to be charged with Excess Profits Tax. It will be difficult to persuade societies that they ought to go on doing that, and the inclination will be for them to declare the whole amount in dividends and thus put more purchasing power into the hands of the public. I am sure that patriotically they will not do it, but very often that is forgotten when questions of dividends are being dealt with, either by companies or by co-operative societies. Supposing that is not done, all co-operative societies and companies, if they see that they are going to make excess profits, will, as the hon. Member for Hastings (Mr. Hely-Hutchinson) pointed out, have a direct financial inducement to build up their properties and capital assets so that they will make more profits after the war. The result will be that the Government will not get the 100 per cent. Excess Profits Tax.
That brings me to the important point which I have brought before the Chancellor on a previous occasion. Whether any notice is taken of these things, I am not too sure. I refer to the question of capital appreciation. The Chancellor announced that there were to be no more bonus shares, the inference being that the Government were wiping out all question of people making money out of the war. I pointed out then, and I point out again,


that the question of bonus shares has no effect on the question of the capital appreciation of ordinary shares.

Mr. Deputy-Speaker: The hon. Member is now raising a point which should be discussed on another Bill altogether.

Mr. Woodburn: I am speaking about the 100 per cent. Excess Profits Tax and the question of the avoidance of tax. Surtax is avoided if, instead of a dividend being declared, it is put into reserves. If it is put into reserves Surtax is not charged, that is, if it is not declared as dividends Surtax is not charged, because it never reaches the person concerned. Therefore, the avoidance of Surtax is closely concerned in this point, for the abolition of bonus shares was supposed to do away with this avoidance. Avoidance of Surtax, however, is simple, even with the abolition of bonus shares, so long as companies are allowed to appreciate reserves and the shares can be sold at a higher price. If you sell an ordinary share at £2, you get £2 for it, whereas if you sell two bonus shares at £2, it is the same £2. Therefore, unless the whole question of capital appreciation is dealt with the avoidance of Surtax will not be checked.
The Chancellor also mentioned capital appreciation in connection with the Board of Referees' power to deal with a company on its actual capital and not on its nominal capital. I suggest that it is nonsense to deal with any company on its nominal capital, because hardly any company works solely on its nominal capital; it is either below it or above it. While I appreciate the point which the right hon. Gentleman made about the Board of Referees having the power, so as to be just, to take into account a greater real capital than the nominal capital of a company in order to give greater dividends, there is a point which seems to have been completely forgotten. It is that some companies have a great amount of watered capital. Under this Bill, as far as I can see, they will be able to make up to 10 times their present profit and pay it out without any check from the Treasury. Therefore, I suggest that in addition to taking into account the appreciated capital where reserves exist, the Government must take into account the watered capital where the nominal capital is perhaps 40 times greater than the real capital which

is being worked in the concern. I have in mind a company, which I knew for many years, whose £1 shares were quoted on the market at 1s. Obviously, if that company is allowed to build its capital up by profits only, it is paying dividends on the 1s. which are equal to the dividends it ought to be paying on the £1. It could thus pay 20 times its present profit without being checked by the Treasury.
I should like also to raise a question about the avoidance of Income Tax. I know a man who actually boasted that he sent for an insurance company to see him and to tell him how, if he gave them £10,000, it could be invested without his having to pay Income Tax and be returned to him in the form, of capital appreciation. The company brought a proposal to him within a week by which, after seven years, by giving the insurance company £10,000, he would get increasing annual sums, which would be free from Income Tax because they came from capital appreciations. He told me that he was doing it, not because he thought it was right, but because so many of his wealthy friends were doing it, and he did not see why he should pay Income Tax if they were dodging it. I do not know whether the Chancellor knows this method, but I suggest that his officers should look into it, because if my informant's statement is correct, a considerable number of wealthy people are avoiding paying their due share of the expenses of the country.
War is fought by materials which are produced by the labour of the country. When we talk in terms of a Budget of £2,000,000,000 it simply means that the Government are allocating that labour instead of the private individuals who normally have the income. In other words, the mere question of cash is simply putting a name to the efforts that are being made by the Cabinet to organise the country for war. We on this side welcome the great comprehensive plan that has now been introduced, and we regret that it did not come sooner. We hope that, in spite of the present size of the Budget, the success of that plan will mean that a great number of people not now working on the war effort will be harnessed to it in the near future and that when the next Budget is brought forward, as we expect in a month or two, it will


be possible for the Government to report to the House that, far from having under-spent their estimate, they have largely overspent and have been able to produce enough material to supply the Armed Forces with all they require, to provide the country with the defences it needs, and to provide, indeed, the means to victory.

6.27 p.m.

Mr. Spens: There is a number of points on which in normal times I would have liked to spend some time, but I feel, like other Members, that the circumstances in which we are discussing this Finance Bill must, to a large extent, guide our remarks, and the attitude we take up in the later proceedings on the Bill. There have been suggestions of something in the nature of a personal Excess Profits Tax, whereby those who, during the war, find themselves with a greater income should make some substantial contribution by taxation to the State. The equity of it is based on the fact that those who are in the Armed Forces are giving infinitely greater services for longer hours and smaller pay than a great number of those who are serving in the workshops and elsewhere.

Mr. Woodburn: Ts the hon. and learned Member aware that many men who, in normal life, have reasonably small salaries and have become officers, have greatly increased their income, and the suggestion would also apply to the Army as well as to civilians?

Mr. Spens: Certainly, it would apply to any person who, by going into the Army, has increased his income. Everybody appreciates that, human nature being as it is, the hon. Member for Clackmannan, Eastern (Mr. Woodburn) was probably right when he said that unless there was extra remuneration for extra services, a good deal of the drive might be taken from industry. But that, it seems to me, is not the whole of the picture. Dealing first with those people who are giving extra service, it seems to me that it would be equitable to say that if before the war a man was earning, say, £4 a week he should be entitled to earn up to £8 a week, and that if his patriotism was such that he still did an extra amount of work for which he got extra remuneration it would not be unreasonable to ask him to part with that part of his excess remuneration.
But I appreciate the difficulties of that class, and I want to remind the House and, through my right hon. and gallant Friend, the Chancellor of the Exchequer of those who are getting substantially increased income out of the war without rendering any service whatsoever. As I said in September, any hon. Member who represents a reception area knows that there are two classes of householders, those who have been required by the State to receive and care for evacuees, and those who for one reason or another have escaped that burden, sometimes quite properly, sometimes less properly. The one class have had put upon them a burden which is costing them money, in spite of the allowance. Those in the other class may have a spare room or rooms, and, in the case of large houses, may even have a flat of which they can make use. Into those areas have flocked voluntary evacuees, and the residents with empty accommodation have found no difficulty since September in letting their rooms and flats, though in a normal winter they would never have a guest. They are a class who, by pure accident, are substantially better off than they were before, and, what is more serious, substantially better off than their neighbours upon whom the State has imposed a burden. Therefore, I still venture to think that there is a case for investigation to see whether there are not certain classes in the community who might be asked to pay something in the nature of a personal excess profits tax.
Passing from that to what is in the Bill, the announcement that the Excess Profits Tax all round is to be 100 per cent. is of first-class importance, and I think everybody welcomes it. It was impossible to have one rate for one industry or part of an industry and another rate for another. But just let us think what this change means. There was omitted from the Chancellor's speech a calculation or a guess which I should like to have heard. The estimates included a certain amount from Income Tax and a certain amount from Surtax, and those estimates must have been based on the assumption that the Excess Profits Tax was to take only 60 per cent. of the excess profits and would leave in the hands of the companies concerned their standard profits plus the remaining 40 per cent., out of which sum of money each company would be able, if it


thought fit, to declare dividends absorbing the whole amount, paying Income Tax on that sum of money on behalf of its shareholders, and the shareholders paying Surtax on the amount which they were to receive. It is true that the State is now to get 100 per cent. Excess Profits Tax, but it loses the Income Tax on the 40 per cent. and also loses the Surtax on that 40 per cent. from those who will receive only dividends paid out of a sum equal to the standard profits. It is clear that a great number of shareholders will pay Surtax on a very much smaller amount of dividend than has been estimated, and it may very well be that because of that the actual rate of Surtax they will pay will be lower. Therefore, although the State will be getting 100 per cent. Excess Profits Tax in the first instance, and that may be a safer and better way to get it, there must be a pretty substantial set-off for loss of Income Tax and Surtax to be taken into consideration.
I am only repeating what my hon. Friend the Member for Hastings (Mr. Hely-Hutchinson) has said, but I would remind the House that the vice of 100 per cent. Excess Profits Tax is, of course, that in one sense it pays a company not to produce extra profits at all but to spend the money it earns in all sorts of ways. That was a notorious vice of the Excess Profits Duty of the last war. It led companies to be careless about their expenditure, in many cases to go to the length of paying ridiculous charges for services. The answer always was that it did not matter, as it was the Government that was paying, because if they did not spend the money it would all go in Excess Profits Tax. I have searched through the provisions of this Bill—I made the same point in September, and I think the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) did so too—to see whether those who draft these marvellous Clauses have been able to think of any method by which that can be stopped, and I am bound to say that I can find nothing. I think it is a necessary vice of a tax of this description, and all we can hope is that, having regard to the circumstances of the present situation, the loyalty and patriotism of all concerned will be such as to see that a managing director to whom an estimate for work is submitted will not say, "I

am not going to check it up, the Government will pay," but that he will do his work as carefully as if this tax did not exist.
Coming to the tax itself, the simple little 10 Sections and one Schedule of the Finance (No. 2) Act, 1939, in which the details of the tax were confined when it was put before us, have blossomed out into no less than 40 additional pages of print in this Bill. And, alas, it is all legislation by reference. Already I have spent considerable time in comparing the provisions of this Bill with the Act of 1939, trying to make out how much is being repealed, where words have been put in, and where there are provisos, and at the end of it I am as ignorant as when I started. It is one of those examples of legislation by reference on which I can congratulate nobody. No one is disputing the principle of the Excess Profits Tax at the present time, or the rate of the tax. The only thing about which everyone was anxious when it was introduced in September, and about which everyone is still anxious to-day, is to see that a burden of this magnitude is apportioned fairly as between concern and concern. The most important of all these provisions are those which provide that people who think that the original estimate of their standard profits is unfair to them shall have a proper opportunity of putting their case before a tribunal, and, if they can make a case, shall be given relief, and that as we get more experience of the tax and as assessments are made from year to year, concerns which regard them as unfair shall have an opportunity of putting their case again before the tribunal.
When the Finance (No. 2) Act, 1939, was introduced all of us criticised very severely that portion of it which gave to a very few concerns, in exceptional cases, the right to challenge the original estimate of their standard profits. My Noble Friend the Lord Chancellor promised after that criticism that he would consider with those who advise him representations made on behalf of particular industries or particular firms. With the utmost courtesy, giving up to the work weeks of time, the Lord Chancellor did arrange that that should be done, and I think there can hardly be an industry or a firm which has not had an opportunity of making its case to him and those who advised him. The result is that instead of


one Sub-section we have a Clause covering about four pages and dealing with the main types of special cases which require to be provided for. Everyone ought to be very grateful for the consideration given to these matters and the thoroughness with which the work has been done.
All I want to say now is that I am not absolutely happy about Sub-section (5), which is the Sub-section that puts the ceiling to the amount of standard profit which can be obtained under the preceding Sub-sections. When I had got to the end of Sub-section (4) I thought the Chancellor of the Exchequer and the Treasury had been extraordinarily kind and generous, but Sub-section (5) seems to be curtailing that generosity. At a later stage that will perhaps be one of the Sub-sections which we shall want to discuss. Naturally, when there are 20 pages of text and 20 pages of Schedules for a tax of this description anyone anxious to see that the tax worked fairly would, in ordinary times, have put down a mass of Amendments in order to get at least explanations and information, but I feel that at this time the House does not want Amendment after Amendment of that description. Therefore, as far as I am concerned, I propose to raise only certain major points. What will happen is that as each year passes we shall learn more and more where hard cases arise under the Schedules and the Regulations. Each year each concern will have the right of appeal against its assessment, but, of course, it will be no use to appeal and to be told, "We are very sorry, but the assessment is perfectly right, because the Regulations make it so. The trouble is that the Regulations in your case are hard." I know that no Chancellor of the Exchequer can bind his successors, but I hope that if in its working this tax, very complicated and mixed up, as it is, with N.D.C., reveals inequalities and unfairnesses, the Chancellor of the Exchequer will, like his predecessor, consider with a friendly mind reasonable Amendments to make the tax fair as between concern and concern. If that be the position, I cannot believe that the House would want detailed Amendments at a later stage on this highly complicated machinery which lays down the tax. Therefore, except for a few major Amendments which one would venture to put down later on, one does

not propose to burden the Order Paper with a mass of detailed Amendments.
Let me end my speech by saying one further thing. The Excess Profits Tax presupposes that it will bring in all that is desirable at this time, and that concerns will earn excess profits. That will not be done unless everybody, from the head of the business to the last-joined boy, puts his whole back into the job at which he is employed. The 100 per cent. Excess Profits Tax will undoubtedly disappoint some people in the country, but I believe the announcement made in this Debate, in May, 1940, to be an indication that will be accepted by the country at large that the patriotism required to make this 100 per cent. Excess Profits Tax produce more than the Chancellor and the Government expect will be forthcoming, and that the Chancellor will be able, by means of this tax, to make good some of the other deficiencies which will reveal themselves elsewhere.

6.48 p.m.

Mr. David Adams: The House will recollect that when the Budget speech was made there were loud complaints that the burdens of taxation were insufficient. Since then it has been shown that it takes only about an hour and a half to conscript the wealth of the country. I must express my disappointment at this Measure. I should have thought the Government would, taking advantage of their new powers, withdraw this Bill and bring in at a later date something more in harmony with the demands, particularly on the Government side, which the House made when the Budget was introduced and subsequently. I do not know whether it would be in order to observe also how much greater could have been the return if the Bill had been drawn upon those lines. We would undoubtedly have had an annual capital tax on fortunes over £10,000, which would pay a small tax of 2 per cent., bringing the Chancellor £240,000,000 in the course of the next 12 months. The taxation of ground values, which was a very popular sort of anticipated revenue with the late Chancellor, would, on his showing, have brought into the State another sum of £200,000,000.
During this discussion, and also the discussion upon the Budget statement, the question of capital appreciation has been mentioned, yet this Measure largely ignores capital appreciation, which is not


subject to taxation. Certain forms are subject to taxation, but other forms are entirely relieved. It may be justly calculated that a very large revenue would ensue from that source, if all forms of capital appreciation which to-day escape the attention of the Chancellor of the Exchequer were brought into his Budget. However, the Budget is satisfactory as far as it goes, and it is clear, even to the unobservant, that, if the war continues, the sacrifices upon those who possess wealth and income in this country are bound rapidly to be intensified. This Measure goes, admittedly, considerably in that direction.
In regard to Excess Profits Tax, I was mystified during the Budget statement at the smallness of the amount, £70,000,000 per annum, which the Chancellor estimated. From this Measure there may be some magical result not anticipated by the ex-Chancellor of the Exchequer, by way of an enormous increase in the amount received from the Excess Profits Tax. During the last war, this tax was raised to 80 per cent., and it brought to the Treasury £420,000,000, as against the £70,000,000 expected by the Chancellor of the Exchequer. This Measure may have some necromantic powers to bring in this very large sum not at present budgeted for.
It is satisfactory that the Excess Profits Tax is to be imposed upon all businesses in the country. It will be extremely difficult to show what trades or businesses have not benefited indirectly, at least, from the operations and extent of the war. It is true that the operation of the tax will enable many disquieting practices to be observed, and it is to the interest of the State that, subsequent to the war, our industries should remain in a reasonably efficient condition. I have no objection to certain steps being taken by our industrial leaders to rehabilitate and modernise their plant, even during the course of the war. It is, relatively speaking, a patriotic action, in the interests of employés and of the State, that factories should be maintained in an efficient condition for the fierce international struggle that is bound to ensue after the war.
It is gratifying that Estate Duty is at last to be dealt with. With regard to the restrictions of dividends and the abolition of share bonuses, it seems to be the

general opinion that the share bonus is some sort of iniquitous practice on the part of certain manufacturers, traders and others, but, as a matter of fact, many firms have paid a share bonus virtually, in the way of dividends, for many years past, and have not been paying excessive dividends at the same time as bonus shares have been handed out. There is an important point which the Chancellor ought to note, with respect to this restriction of dividends and bonus shares abolition. They will undoubtedly leave large sums in the hands of directors which would have been disbursed to shareholders. I contend that, as these directors are under a statutory obligation to do the best for their shareholders and have unrestricted rights, very largely, as to how such sums will be invested, these moneys may be invested by the directors in directions not necessarily in harmony with the desires of the Exchequer. It is, therefore, clear that these reserves which the Government are permitting to be built up in the industries of the country ought to be under a statutory obligation to be invested in Government loans. There would be no difficulty about this, and I wonder just what the Chancellor of the Exchequer thinks about it. There may be a demand from this part of the House for a Return, indicating just what those reserves are and what proportion has been invested in Government loans and in the way which the Government desire.
Those are the main points to which, at this stage, I desire to draw attention. I must repeat my disappointment that the opporunity has not been taken to bring in a more comprehensive Measure than the present one, but, if its provisions are utilised, as we believe they will be, not only by the Government and the Chancellor of the Exchequer, but by those who come in contact with the taxpayers, with the proper, public, catholic outlook which patriotism requires, the Measure will be of great advantage to the country.

6.58 p.m.

Mr. Levy: I want to occupy not more than two or three minutes to make one observation with regard to Clause 26. My hon. and learned Friend the Member for Ashford (Mr. Spens) did not quite appreciate that the 100 per cent. Excess Profits Tax to which he referred


relates only to those concerns that will be controlled. I did not understand that it was to be for every concern throughout the whole of the country. I have been trying to read Clause 26, and I find a little difficulty in understanding it. On reading Sub-section (5), I found that it merely took away everything that was settled in Sub-sections (2) to (4) where hard cases exist and where firms had the right to go to the Board of Referees. I assume that the Board will have, as chairman, a gentleman of legal standing, and will be in a position to study cases brought before them in all aspects so that their decisions will be equitable and just. But according to Sub-section (5) it seems to me that after their arrival at a decision they are bound by Sub-section (5) to say, "Although we feel that a certain standard is equitable, yet in this Sub-section we are given a limit, and that limit, in our judgment, is quite unfair."
When we get to the Committee stage we shall certainly put down one or two Amendments with regard to that point, but in the meantime perhaps my right hon. Friend will give Sub-section (5) his consideration. I know that he will do so, because he is essentially one upon whom we rely for doing that which is fair. I just wanted to make those few remarks, because I felt, like so many other hon. Members did, that this is not the time to put down many Amendments, neither is it the time for emotionalism. This is a Bill of major importance, and it is up to the Members of the House of Commons to study these matters coolly and with judgment, because it affects the whole of the country. If it is possible to improve that which is quite unfair, then I am sure that my right hon. Friend will give this matter his sympathetic and serious consideration.

7.2 p.m.

Mr. Gallacher: I want to make a few observations in connection with this Bill. An hon. Member opposite said that he would have had much more to say if the time had been normal. I do not know what he means by normal. I would have desired to make a most violent attack upon the taxes on tobacco, beer and postage stamps, but I know, as everybody else knows, that the tragic situation which the British lads are facing in Belgium and the growing menace that

darkens the lives of the people of this country does not create an atmosphere for discussing tobacco, beer and postage stamps. At the same time, the Minister must remember that because of these taxes almost impossible burdens have been placed on the very poorest of the people, and that matter has to be taken into account.
What I am mostly concerned with is the fact that at such a time as this a quite formal Budget is introduced and it is discussed in a most formal manner. Of course, there are certain propositions in connection with the Budget which are rather different in degree from what have been presented before, but, so far as principle is concerned, there is nothing in this Finance Bill that affects in the slightest degree any principle of private property or private profits. The principle of private property and private profits remains there all the time, thoroughly safeguarded. Every hon. Member knows the attitude that I and those with whom I have been associated adopt towards the war and the character of the war. But we have to face the fact that the people in this country are in the most serious danger, and our policy must be shaped towards protecting and extricating the people from that danger and from the horrors of the war. It will not be for me at this moment to discuss in connection with this Finance Bill the attitude which we should adopt towards an entire and complete change in the character of the Government, but I am entitled to put before the House the necessity for an entire and complete change of attitude towards this Bill. We were told by the previous speaker that there should be no emotionalism, but that there should be an equitable, just and fail standard of profit. There has been no hesitation in speaking with the utmost emotionalism about the workers, for a speed-up, for a seven-day week and for the breaking-down of restrictions, but when it comes to private profits it is said, "Let us not be emotional." That is an attitude which will never save the people of this country, but will damn them to a fate worse than that which they are facing to-day.
Let us remember that in the early stages of the war the Prime Minister made a statement in the House to the effect that there would be a new world after the war, and I remember the present Lord Privy Seal, who was then Leader of


the Opposition, asking him whether he could give us an idea of the character of that new world. The Chancellor of the Exchequer said he did not want to see anybody in this country becoming wealthier as a consequence of the war. But does the Chancellor present before us the idea that the wealthy people of the country will come out of this war with all their wealth intact? Is that a new world? Will the Finance Bill do anything about it? Shall we have the crowd of millionaires and the wealthy people of this country when the war is over, after all the waste and destruction? The Chancellor of the Exchequer also said that in the Finance Bill there was a provision that a certain amount of savings of the money loaned for the new Defence Bonds—£300 odd—would be excluded after the war from the operation of the means test. This is a very important point. But before dealing with it I would like an understanding on this question. At the present time, if an old age pensioner has £300 in a savings bank, he is excluded from any supplement to his pension. If an old age pensioner lifts that £300 from the savings bank and puts it in Defence Bonds, does that mean that when the war is over that money will be excluded from the means test calculation, or will the exclusion come into effect right now before the war is over?
According to the Chancellor's statement, in the new world after the war we shall still have the wealthy people with their wealth. He hopes they do not increase their wealth, but we shall have the wealthy people and the millionaires at the top and the people down below suffering from poverty and the means test. It is clear that a formal conception of that kind is simply playing with the desperate situation that confronts the people of this country. I and my party are convinced that the only way to extricate the people from the terrible situation which confronts them is a complete change of Government, and a complete change of system. Face to face with a situation such as now exists, it demands a complete change of system: not merely the playing about with a proposal for 100 per cent. Excess Profits Tax. I could tell stories from my own experience, and the hon. Member for Dumbarton Burghs (Mr. Kirkwood) could

tell stories from his experience, of how during the last war they played about on the Clyde with this question of excess profits. I know, from observations such as that made by the hon. Member who spoke before me, with his desire that there should be no emotionalism so far as profits are concerned, no matter how much emotionalism there may be so far as the workers are concerned, that this Finance Bill is simply playing with the situation. The one thing that is needed is to put an end to this sacrosanct approach to private property. In this tragic situation, private property and private profits must go. We must get a Government which represents the masses of the people, and which will put an end to the system in which private property stands in the way of the safety of the people.

7.14 p.m.

Mr. Riley: I want to associate myself with the expression of disappointment uttered by the hon. Member for Consett (Mr. David Adams) at the fact that there is no provision whatever in this Bill for the beginning of a capital tax on property. Last week we passed a short Bill in the course of two or three hours, which laid down that, in the grave situation with which the country is faced, we must take power to call upon all persons and property—the word "property" was used in the Bill—to be placed completely at the disposal of the nation. I suggest that the Bill before us does not represent the decision at which we then arrived. All that this Bill does, with regard to the carrying out of that decision, is, according to the Chancellor's statement, to indicate that we are going to take from the annual incomes and revenues of people a little more than was originally intended. Instead of the Excess Profits Tax being 60 per cent., it is now to be 100 per cent. But that is only on current profits and current incomes, made during the year. It is not an additional obligation upon property as such. The present Lord Chancellor, when he presented his Budget, estimated an expenditure of some £2,600,000,000 during the current year. His estimated revenue was roughly £1,400,000,000, leaving a deficit of £1,200,000,000.
We have had no proposals by the Government as to how that great deficiency is to be met. Surely, in view of the realisation that the time has come


when definite measures should be taken to call upon all the resources of the country in the emergency, a beginning should have been made in this Bill to provide for a capital levy on property. It was pointed out by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) when he spoke on the Budget, and it has not been disputed since, that a 2 per cent. capital levy on fortunes of £20,000 a year upwards would bring in £200,000,000. Surely that would not be an unfair thing. A 2 per cent. levy on a fortune of £20,000 a year in various forms, including real property and liquid property of various kinds, would amount to £400. So any person with a fortune of £20,000 would have to sacrifice out of that property £400—in addition, it is true, to Income Tax. He would still be left with £19,600 of a fortune. Assuming, for the sake of argument, that the war goes on for five years, that person, paying a levy at that rate, would still be left at the end of the war with £18,000. Even if the levy were fixed at 4 per cent., and the holder of a fortune of £20,000 contributed therefore, £800 a year, he would still after five years be left with £16,000 of a fortune.
I suggest, therefore, that if the Government meant anything last week when they said the time had come for persons and property to be at the disposal of the State in its necessity, then something ought to have been done with regard to a capital levy. It may be argued that objections have been made, that there are practical difficulties in the way, and that people with fortunes of £20,000 may not have £400 available when called upon to make the contribution. But surely very few people who have fortunes of £20,000 have not some part of the money in the form of liquid assets which could be made available if the necessity arose. I hope, therefore, that before the Finance Bill becomes law that aspect of the matter will be faced and that we shall make a start in this Bill with an annual capital tax on property and not simply upon incomes.

7.22 p.m.

The Financial Secretary to the Treasury (Captain Crookshank): I should not like this Debate to close without my saying a few words, though they will be very brief, because I do not wish to be disrespectful to anyone. I think that a good many hon. Members take for granted the fact that my right hon. Friend has

not heard these Debates because of the work he has been doing in another sphere, and that a good many of the points which we have discussed on the Budget stage have been raised again. It is very useful for him to know the views formed by hon. Members on these points and the questions to which they wish him to apply his mind. It is true, as has been said, that he has been in the position of inheriting a Budget and Finance Bill, and he has also inherited a Financial Secretary, and I will try, when the time comes, to discuss the matters which have been raised to-day and put to him points which unfortunately he was not able to hear during the short time of the Debate when he was out.
The Debate has really turned very considerably, apart from the opening speeches, on the question of the Excess Profits Tax. I am very much obliged to my hon. and learned Friend the Member for Ashford (Mr. Spens) for the tribute which he paid to the great work which had been done since September on these provisions of the Bill. The Chancellor of the Exchequer at that time was very anxious that all criticisms made in this House should be carefully considered, and it has meant a great deal of work for the experts to try and work out something which was going to be, as my hon. and learned Friend pointed out, vitally necessary, namely, fairness as between concern and concern, and, subject to criticism on one or two points which we will discuss later, I think that by and large we have succeeded there. It is most important that we should succeed, because now that in place of what was 60 per cent. in September, 100 per cent. has been substituted as the rate of tax, it makes it all the more essential that at the earliest possible moment—I am sure that all will agree whatever they think about the tax—we should get the right framework for the tax and the right method of working out and estimating the standard profits, so that we can find out what is the excess which has to be taxed at 100 per cent. While I agree with my hon. and learned Friend that the Clauses and the Schedules are not perhaps quite as clear as parish magazine language, they are, to those who have studied these matters, really fairly intelligible considering the difficulties of the problem.
The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence), who


opened the Debate, said something on the subject of interest rates, and I would like to say in answer to him that it certainly is the object of the present Chancellor of the Exchequer, as it was of his predecessor, to borrow as cheaply as possible, and that no particular rate will be regarded as sacrosanct. I think that that was the assurance which the right hon. Gentleman wanted. He also touched upon another point on which the House will perhaps allow me to say a few words. He said that he found it very difficult to understand, although it has been the subject of Question and Answer in this House on several occasions during recent months, the question of the conversion by local authorities of some of their high-interest loans, and that he could not quite see the difficulty in the way of conversion. Perhaps he will allow me to put it in this way. It is partly that a great many of these local authorities' loans are trustee securities and they involve therefore, when the question of conversion arises, the use of very much the same machinery in the way of underwriting and so on as purely governmental issues; and they appeal, incidentally, to the same section of the investing public. That being so, the Government cannot yet say that the time is ripe for this type of issue. There is not only the question of conversion which the right hon. Gentleman talks about, but there is also the question we have to bear in mind of the possibility in certain cases of local authorities coming into this particular market for new money which they may require for essential services.
I can assure him that the matter is under constant observation in the Treasury, and I am certain that my right hon. Friend is also keeping an eye on the matter. All I would say for the time being is that perhaps the right hon. Gentleman and those with whom he is in touch will be patient. A good many of these loans have been outstanding for a number of years, some for as long as 20 years, and it is a little difficult therefore to assume that it is vitally necessary that many of them should enter into conversion operations at the present time. I can assure the right hon. Gentleman that we are watching the point which he has made and the arguments which have been adduced, but I do not think I can take the matter any further now.
The other point, which was of considerable importance, though perhaps not directly connected with the Bill, was that made by the hon. Member for East Birkenhead (Mr. White) when he reported that he had had complaints from a number of contractors in regard to the delay in payments due to them. That is a matter which has caused some anxiety for sometime past, but in recent months, and indeed in recent weeks, hon. Members will find that the machinery of payment has been very considerably speeded up by the Supply Departments. The question is, however, one for the Supply Departments and not for the Treasury: the Treasury finds the money but does not actually pay the contractors. Progress payments are now being made not only at more frequent intervals but also of amounts or percentages far greater than anything we had allowed before the war started. I would say to the right hon. Gentleman and others who are interested in this matter that the question of accelerating payment is constantly under review because the Supply Departments are themselves fully alive to the desirability that they should remove as quickly as possible any complaints that there might be of delay. I can, I think, give the hon. Gentleman an assurance that, as far as we are concerned, we will try to see that this is done as speedily as possible because we do see the disadvantages to the general economy that may arise through any delays in payment for contracts.
As regard the other points which were made, since there were so many ruled out of order during the discussion, I am afraid that I cannot answer them, but in so far as they were made before they were ruled out I can promise that they will be considered. What hon. Members endeavoured to say after these rulings we may not be able to discuss in this House, but we can communicate with one another about them. The hon. Gentleman opposite who spoke last did not seem to think the Bill suitable to the moment. I do not know if he heard the speech of my hon. and learned Friend the Member for Ashford (Mr. Spens), who, with others, pointed out during the Debate that the announcement made by my right hon. Friend to raise the Excess Profits Tax to 100 per cent. was not only welcomed in many quarters of the House but was regarded as a clear sign of the determination of us all to press on in every field,


financial, material or personal, to do all we can to shorten the war and reach a victorious conclusion.
The fact that so many hon. Members welcomed the imposition of a tax of that magnitude does indicate not only their own feelings but the feelings of those they represent in this House. It is rare, surely, when heavy taxation is imposed, for it to be welcomed whole-heartedly and it is in line with the feelings of us all at the present time. My hon. and learned Friend also said that this proposal must have some effect on our estimates of other tax revenue. By and large that must be so in the nature of the case, but it would be quite impossible at the present time to give any definite figures. However, in so far as the Measure will reduce the money which comes into the pockets of people, it will mean so much less Income Tax and Surtax; most of it is, on the other hand, collected at another stage.
It is difficult to say offhand what the effect of that will be on the whole structure of taxation, but from the point of view of morale it is enormous and evident. In so far as the height of the Excess Profits Tax was criticised, the point was made that if you make it too high and take the whole of excess profits there may be a temptation for companies to spend money in other ways because they are no longer directly interested in whether profits are high or low. My hon. and learned Friend asked what could be done to check that. I do not know that any direct action can be taken except that, as I mentioned in my speech on the last Bill, we should not wed our minds too much to the belief that the Excess Profits Tax in this war will necessarily and inevitably have the same results as the Excess Profits Duty in the last war; and for two reasons. First, when people say, "It will encourage extravagance, the building of extensions and the putting up of more plant and so on" that may not be possible under the new powers which we have. The money may be there but the steel and the bricks and the bricklayers may not, because they will be employed in other ways. That is an important distinction which we ought to bear in mind, Second, we are living in an entirely different atmosphere. People are not treating this kind of thing as they

did in 1919. It is on the patriotism of all our people, on their strength of mind and on their courage that we rely in these difficult days.

Mr. Benson: May I ask whether silence on the subject of the Treasury bill rate is an indication that we shall not get any information from the present Chancellor, as we did not from the last?

Captain Crookshank: I would not say that. I think that was one of the points which was ruled out of order, although I did not hear the hon. Gentleman's speech. While I cannot fully speak the mind of the Chancellor I am quite sure that on the appropriate occasion he will express himself.

Mr. Benson: What will be the appropriate occasion on which we shall get a reply to the question which has been put a number of times: Why has the Treasury agreed to increase the re-discount rate of the banks from ½ per cent. to 1 per cent.? That is what we want to know.

Mr. Stokes: May I have a reply to a specific question which I put to the right hon. and gallant Gentleman when he was here? I told him that the Governor of the Bank of England states that the Treasury do control the Bank Rate, and I asked him whether he concurs or disagrees.

Mr. Gallacher: Will the right hon. and gallant Gentleman tell old age pensioners that if they have £300 and give that money to Defence Loan, it will be excluded from consideration under the means test?

Sir K. Wood: There is to be a Bill introduced on that matter, and then we should be able to discuss it.

Mr. Stokes: May I have an answer to my question?
Question, "That the Bill be now read a Second time," put, and agreed to.
Bill read a Second time, and committed to a Committee of the Whole House for Tuesday next.—[Mr. Buchan-Hepburn.]

Orders of the Day — NATIONAL LOANS (NO. 2) BILL.

Order for Second Reading read.

7.38 p.m.

Sir K. Wood: I beg to move, "That the Bill be now read a Second time."
It has been intimated to me that I need not explain the subject-matter of this Bill again, because many hon. Members were here when I gave a full explanation of the matter on the Ways and Means Resolution. I would remind the House, however, that this Bill makes provision in the main for the extension of the powers taken under the National Loans Act, 1939, and that under Section 1 of that Act the Treasury were given powers to raise in such a matter as they thought fit any money required for Supply grants for the year ending 31st March, 1940, and, in addition, a margin of not more than £250,000,000. It is now necessary, as I explained to the House a few days ago, to take comparable powers in respect of Supply grants for the year ending 31st March, 1941, plus a margin, again, of not more than £250,000,000. Clause 2 of the Bill is designed to release the Treasury from any contractual obligations to issue securities under the National Loans Act in the form of bearer bonds or bond certificates. This is following recent measures that we have taken to tighten our exchange control with special reference to the ability of the enemy to get hold of the sterling assets of countries he has over-run. With these few words I introduce the Bill and now ask the House to give it a Second Reading.
Question, "That the Bill be now read a Second time," put, and agreed to.
Bill read a Second time, and considered in Committee, pursuant to the Order of the House this day; reported, without Amendment; read the Third time, and passed.

Orders of the Day — NATIONAL EXPENDITURE.

Ordered, "That the Special Report from the Select Committee on National Expenditure be now taken into consideration.—[Sir J. Wardlaw-Milne.]

Special Report considered accordingly.

Ordered,

"That the Co-ordinating Sub-committee of the Select Committee have power, in cases where considerations of national security preclude the publishing of certain recommenda-

tions and of the arguments upon which they are based, to address a memorandum to the Prime Minister for the consideration of the War Cabinet, provided that the Select Committee do report to the House on every occasion when this power shall have been exercised."

The remaining Orders were read, and postponed.

Orders of the Day — BANK RATE.

Motion made and Question proposed, "That this House do now adjourn."—[Mr. Buchan-Hepburn.]

7.42 p.m.

Mr. Stokes: I have given notice to the Financial Secretary to the Treasury that I propose to raise the question of the Bank Rate on the Adjournment. This afternoon in the course of my speech I put a specific question to the right hon. and gallant Member and said that I had it on the authority of the Governor of the Bank of England that the Bank of England no longer controls the Bank Rate but that the Treasury does. I asked the Financial Secretary for a specific answer whether that was correct or not. Later on in the speech of the Financial Secretary I tried to elicit information but did not get any reply. I have tried on more than one occasion with the ex-Chancellor of the Exchequer to discover what are the facts, but I never got a satisfactory reply. In the last Debate I indicated to the ex-Chancellor of the Exchequer that I had it on good authority that the Governor of the Bank of England no longer controlled the Bank Rate. Let me give him a conversation I had with the Governor of the Bank of England. I said to him one day, "The Chancellor of the Exchequer tells me that he does not control the Bank Rate," and the reply I got was, "I regret to tell you, Mr. Stokes, that the Chancellor of the Exchequer did not tell you the truth." I do not know where I am. Apparently the Chancellor of the Exchequer says the Governor of the Bank controls the Bank Rate and the Governor of the Bank says the Chancellor of the Exchequer controls the Bank Rate. I think the House should know who does control it, and I hope the Financial Secretary will be able to give me a reply now.

7.45 p.m.

Captain Crookshank: I apologise to the hon. Member for not having dealt with


this question before, but I thought it had been ruled out of order. All I can say is that the hon. Member has put this question several times before and has had on each occasion a similar answer from the Chancellor of the Exchequer. I have not his words here, but I think they were, to the best of my knowledge, that in these matters the Treasury and the Bank of England were in close contact. I should not like these words to be quoted against me because I have not the text of the speech, and the hon. Member and the House know that statements by Ministers have to be very carefully worded. As to what the Governor of the Bank of England may have told the hon. Member I am not called upon to express an opinion. I have no way of knowing what he may have said to somebody else, nor do I think that it is very relevant. All that I am concerned with is the statement made by the ex-Chancellor of the Exchequer, which explained the position I think perfectly clearly. If the hon. Member is not satisfied perhaps he will put another question to the present Chancellor of the Exchequer, who may be able to make the matter more clear to him than did his predecessor.

7.47 p.m.

Mr. Silverman: I do not know why the Treasury should seek to veil this matter in so much mystery. The Financial Secretary has made an extremely clever speech for the purpose of not answering the question. It does not matter in the least what other people may have said at other times or whether what they have said was clear or not. The point is what is his answer now? It is quite a simple question, and it is not an unreasonable question for an hon. Member to ask. The question is, who is it that bears the ultimate responsibility for deciding what the Bank Rate shall be? It is surely not unreasonable for an hon. Member to ask that question. In these times, when we are raising by loan such large sums of money in more than one way, it is an extremely im-

portant matter to the country what the Bank Rate is. No one has ever suggested that the Bank Rate does not vitally affect every commercial asd industrial transaction, and more especially at a time when most of these transactions are under Government control. I am not sure that it is not a defiance of Parliamentary traditions that when a Member of this House asks a perfectly simple question upon a matter of the utmost importance he should be met with an extremely clever speech designed not to give him the information for which he asks.
Hon. Members will agree that the whole foundation of the rights and powers of this House rest upon its control over finance. I do not know how long, in these times, you can expect people to be content not merely that these questions are being dealt with in an apparently casual way, but that information is being withheld on the vital question as to where the responsibility lies and to whom criticism should be addressed. If the hon. Member for Ipswich (Mr. Stokes), who knows far more about these matters than I ever shall, wishes to advance, as would be perfectly within his rights, some criticism of the prevailing Bank Rate, to whom is he to address that criticism? Is it the Treasury that is responsible, or is he to criticise the Bank of England? Until that is known, any power of control in this House is impossible. I think that the House, no matter what may be its views on these questions, ought not to be satisfied with a situation in which nobody knows who takes the responsibility for deciding such an important question.

Mr. David Adams: I wish to ask the Financial Secretary to the Treasury whether, if we put this Question on the Paper, we shall get a specific answer to it?
Question, "That this House do now adjourn," put, and agreed to.

Adjourned accordingly at Ten Minutes before Eight o'Clock.